In a market documented to be appreciating 1% monthly, an appraiser uses a comp closed 5 months ago without any time adjustment. The likely error is:
Correct Answer
A) About 5% understatement of the indicated value
Why this is correct: In a 1% per month appreciating market, a 5-month-old comp is approximately 5% below current value (1% x 5 months). Using it without a time adjustment understates the subject's value by that amount. Why the other choices are wrong: It is an understatement, not an overstatement. Five months is not 'recent' in a fast-moving market. The error is cumulative, not just 1%. Exam tip: In moving markets, always calculate the cumulative time adjustment: rate × time.
Why This Is the Correct Answer
Why this is correct: In a 1% per month appreciating market, a 5-month-old comp is approximately 5% below current value (1% x 5 months). Using it without a time adjustment understates the subject's value by that amount. Why the other choices are wrong: It is an understatement, not an overstatement. Five months is not 'recent' in a fast-moving market. The error is cumulative, not just 1%. Exam tip: In moving markets, always calculate the cumulative time adjustment: rate × time.
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