What can support time adjustments in a declining submarket?
Correct Answer
B) Verified evidence, such as controlled resales or statistics.
Relevant supported market analysis may use controlled resales, statistical models, index evidence or other accepted techniques. Paired sales are not always the only or most reliable source. Generic inflation or a standard positive rate does not establish a local decline adjustment.
Why This Is the Correct Answer
Option B is correct because comparables must be analyzed for changes in market conditions from the contract date to the effective date, and adjustment rates can be determined through statistical analysis, modeling, paired sales or other commonly accepted methods. Verified evidence such as controlled resales or statistics can show the rate of decline. Such support applies whether prices are rising or falling.
Why the Other Options Are Wrong
Option A: General inflation, apart from local property trends.
Option A uses general inflation apart from local property trends. General inflation does not measure how prices changed in the specific submarket, especially one that is declining.
Option C: A fixed 6% positive annual adjustment used in each market.
Option C applies a fixed 6% positive annual adjustment used in each market. A standard positive rate is not market-derived and would move prices the wrong way in a declining submarket.
Option D: A rule prohibiting any adjustment when prices are declining.
Option D relies on a rule prohibiting any adjustment when prices are declining. No such rule exists; declining markets may call for negative time adjustments when supported by evidence.
Time can go down
A time adjustment follows the local market's direction, up or down, and must be backed by local evidence.
How to use: Use this when evaluating support for a market conditions adjustment.
Exam Tip
Reject answers that use generic rates or blanket rules instead of local market evidence.
Common Mistakes to Avoid
- -Applying a standard positive rate regardless of the market
- -Using general inflation as a substitute for local market data
- -Believing declining markets cannot receive time adjustments
Concept Deep Dive
Analysis
This question tests what supports a market conditions adjustment when prices are falling. Time adjustments must reflect local market change shown by verified evidence. Generic inflation, a fixed positive rate or a ban on adjusting do not reflect the actual market.
Background Knowledge
Market conditions adjustments can be positive or negative depending on the direction of price change. Support can come from resales, paired sales, statistical analysis, modeling or other accepted methods. The data should reflect the subject's market and the period between the comparable's contract date and the effective date.
Real-World Application
In a submarket where median prices have dropped over the past year, an appraiser uses resales and a market trend analysis to support a negative monthly adjustment to older comparables.
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