In paired sales analysis, an appraiser finds two similar properties that differ only in that one has a pool and sold for $15,000 more. This indicates the pool's contributory value is:
Correct Answer
C) Approximately $15,000, subject to verification with additional data
Paired sales analysis provides an indication of contributory value, but one pair alone is insufficient for a definitive conclusion. The $15,000 difference suggests the pool's contributory value is approximately that amount, but additional paired sales or market data should be analyzed for verification.
Why This Is the Correct Answer
Option C correctly recognizes that paired sales analysis provides an approximation rather than a definitive value, and emphasizes the need for additional verification. A single paired comparison, while useful, cannot account for all market variables and potential anomalies that might affect the price difference. Professional appraisal practice requires multiple data points and corroborating evidence to establish reliable contributory values. The word 'approximately' acknowledges the inherent limitations of using just one comparison pair.
Why the Other Options Are Wrong
Option A: Exactly $15,000
Option A is incorrect because it suggests the contributory value is exactly $15,000, which implies absolute certainty from a single data point. Paired sales analysis with only one comparison cannot provide exact values due to potential market variables, timing differences, and the possibility of unidentified factors affecting the sale prices.
Option B: At least $15,000
Option B is incorrect because stating the value is 'at least $15,000' implies the pool adds a minimum of that amount, but market evidence could show the actual contributory value might be less if other factors influenced the price difference. A single paired comparison cannot establish a definitive floor value.
Option D: Cannot be determined from this information
Option D is incorrect because paired sales analysis does provide meaningful information about contributory value, even from a single comparison. While not definitive, the $15,000 difference does indicate an approximate contributory value that can be used as a starting point for further analysis.
The PAIR Rule
P - Provides indication, A - Approximately correct, I - Insufficient alone, R - Requires verification. Remember: One PAIR gives you a starting point, but you need multiple pairs to be confident.
How to use: When you see a paired sales question with only one comparison, immediately think 'PAIR' - it provides an approximate indication but requires additional verification. Look for answer choices that include words like 'approximately' and mention the need for more data.
Exam Tip
Look for qualifying language in answer choices like 'approximately,' 'subject to verification,' or 'additional data needed' when dealing with single paired sales comparisons - these often indicate the correct answer.
Common Mistakes to Avoid
- -Assuming one paired sale provides definitive contributory value
- -Failing to recognize the need for verification with additional market data
- -Confusing contributory value with actual construction cost of the feature
Concept Deep Dive
Analysis
Paired sales analysis is a statistical technique used in real estate appraisal to isolate the contributory value of specific property features by comparing sales of similar properties that differ in only one characteristic. While this method provides valuable market-derived evidence of feature values, a single paired comparison is considered insufficient for definitive conclusions due to potential market anomalies, timing differences, or unidentified variables. Professional appraisal standards require multiple data points and verification through additional market evidence to establish reliable contributory values. The technique assumes all other factors are truly equal, which is rarely perfectly achieved in real-world scenarios.
Background Knowledge
Paired sales analysis is a fundamental technique in the sales comparison approach where appraisers compare properties that are similar except for one specific feature to determine that feature's market-derived contributory value. The method requires careful selection of truly comparable properties and recognition that multiple data points strengthen the reliability of conclusions.
Real-World Application
In practice, appraisers typically need 3-5 paired sales to confidently establish a feature's contributory value. For example, when valuing a pool's contribution, an appraiser would seek multiple sales pairs of homes with and without pools in the same market area and time period to verify the initial $15,000 indication.
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