Which plan best organizes analysis before comparing physical differences?
Correct Answer
D) Align rights and relevant transaction terms, analyze market-date differences, then supported property differences.
A conventional analysis aligns rights and transaction terms before treating physical comparisons as equivalent. Mathematical order depends on defined bases, especially mixed fixed-dollar and percentage effects. This is not a universal USPAP hierarchy guaranteeing reliability.
Why This Is the Correct Answer
Option D is correct because aligning rights and relevant transaction terms first, then analyzing market-date differences, then supported property differences follows the conventional adjustment sequence. Comparable sales are adjusted for differences in property rights conveyed, financing and non-realty items before physical comparisons are treated as equivalent. The exact mathematical order still depends on how each adjustment is defined.
Why the Other Options Are Wrong
Option A: Start with physical features and ignore rights.
Option A is wrong because it starts with physical features and ignores rights. Sales of different property rights are not directly comparable, so rights must be addressed rather than ignored.
Option B: Apply location and time adjustments as substitutes for verifying the transferred interest and the transaction terms of each sale.
Option B is wrong because it uses location and time adjustments as substitutes for verifying the transferred interest and transaction terms. Those adjustments measure location and market-condition differences, not differences in rights or terms.
Option C: Compare sale prices in order of distance from the subject.
Option C is wrong because comparing sale prices in order of distance from the subject is not an analysis plan. Distance alone does not address rights, terms, market conditions or property differences.
Deal, then date, then dirt
First align the deal (rights and terms), then the date (market conditions), then the dirt and building (property differences).
How to use: Use this to recall the conventional order of adjustments on a grid.
Exam Tip
Reject answers that let a location or time adjustment stand in for checking rights or terms.
Common Mistakes to Avoid
- -Adjusting physical features before confirming rights and terms
- -Treating a time adjustment as a fix for nonmarket terms
- -Ordering comparables by distance instead of analyzing them
Concept Deep Dive
Analysis
This question tests the conventional organization of the sales comparison analysis. Transactional elements such as rights and terms are addressed first, then market conditions, then property differences. Location and time adjustments cannot substitute for verifying what was sold and on what terms.
Background Knowledge
The elements of comparison commonly start with property rights conveyed, financing terms, conditions of sale and expenditures after sale, followed by market conditions, then location and physical characteristics. This sequence helps ensure each price is on a comparable basis before property differences are measured. The order is a conventional organization rather than a rigid hierarchy.
Real-World Application
An appraiser assembling a grid first confirms each sale's rights, financing and conditions, adjusting one sale for seller financing. Next the appraiser applies a supported market-conditions adjustment. Only then are differences in size, quality and location analyzed.
More Sales Comparison Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
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