In a market saturated with bank-owned sales, an appraiser valuing a typical resale should treat REO transactions as:
Correct Answer
B) Evidence to analyze — usable with care when they define the subject's market
Why this is correct: REO (bank-owned) sales are market transactions and must be considered as evidence. When they dominate the market, they define the market conditions. However, each must be analyzed for possible distress discounts or atypical terms; they are usable with appropriate care and adjustments. Why the other choices are wrong: "Automatically the best comparables, since they dominate the sales volume" ignores that they may not be the most similar or may require adjustment. "Automatically excluded in every analysis" would ignore relevant market evidence. "Equal to normal sales with no scrutiny" fails to recognize potential atypical conditions. Exam tip: Treat distressed sales as market evidence; analyze, adjust, or exclude based on specific facts, not blanket rules.
Why This Is the Correct Answer
Why this is correct: REO (bank-owned) sales are market transactions and must be considered as evidence. When they dominate the market, they define the market conditions. However, each must be analyzed for possible distress discounts or atypical terms; they are usable with appropriate care and adjustments. Why the other choices are wrong: "Automatically the best comparables, since they dominate the sales volume" ignores that they may not be the most similar or may require adjustment. "Automatically excluded in every analysis" would ignore relevant market evidence. "Equal to normal sales with no scrutiny" fails to recognize potential atypical conditions. Exam tip: Treat distressed sales as market evidence; analyze, adjust, or exclude based on specific facts, not blanket rules.
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