In the subject's neighborhood, a long-time broker says that a finished basement adds about $10,000 to a home's price. The appraiser has three well-matched, verified sale pairs of homes with and without finished basements of similar size and quality, indicating differences of $20,000, $22,000, and $24,000. Local contractors charge about $35,000 to finish such a basement. Which basement adjustment is most reasonable?
Correct Answer
C) $22,000
Three well-matched, verified pairs measure the market's actual reaction and outweigh a single broker's general impression, so the adjustment comes from the pairs: their mean (and median) is $22,000. The broker's $10,000 is a rule of thumb that the sales contradict, and $16,000 blends it with the pairs as if both deserved equal weight. The $35,000 contractor charge is cost, not contribution to value.
Why This Is the Correct Answer
Option C is correct because the three verified, well-matched pairs indicate $20,000, $22,000, and $24,000, which average 66,000 / 3 = $22,000. Adjustments must reflect the market's reaction, and an opinion-based rule of thumb should not override what market analysis shows. The pairs cluster tightly, which supports the $22,000 figure.
Why the Other Options Are Wrong
Option A: $10,000
Option A, $10,000, adopts the broker's figure. A general impression from one participant, contradicted by three verified pairs, is a rule of thumb rather than the market's measured reaction; the pairs indicate (20,000 + 22,000 + 24,000) / 3 = $22,000.
Option B: $16,000
Option B, $16,000, averages the broker's $10,000 with the pairs' $22,000: (10,000 + 22,000) / 2. That gives one unverified opinion the same weight as three verified sale pairs, which the evidence does not justify.
Option D: $35,000
Option D, $35,000, is the contractors' charge to finish a basement. An adjustment for a physical feature reflects its contribution to value, not the cost to build it, and the market pairs show a contribution of about $22,000.
Sales speak louder than talk
When what people say and what buyers paid disagree, trust the verified prices. Cost is a third voice that often says something else.
How to use: Use this when an opinion, a cost figure, and sales data point to different adjustments.
Exam Tip
Identify which figure is an opinion, which is a cost, and which is measured from verified sales; the adjustment normally comes from the last group.
Common Mistakes to Avoid
- -Splitting the difference between an opinion and verified data
- -Adjusting by construction cost instead of contribution
- -Taking the highest or lowest pair instead of the central tendency
Concept Deep Dive
Analysis
The question tests how to weigh an interview against conflicting verified sales data, and it adds a cost figure that does not measure value. Interviews are market evidence, but when consistent, verified pairs show a different reaction, the observed sales carry more weight. The candidate must reject both the opinion and the cost, then take the central figure of the pairs.
Background Knowledge
Interviews with brokers and other market participants help explain and corroborate sales data. When an interview conflicts with consistent, verified sales evidence, the appraiser investigates and generally relies on what buyers actually paid. Contribution to value, not construction cost, measures an adjustment for a physical feature.
Real-World Application
A broker tells an appraiser that finished basements barely matter locally, but three verified pairs show a consistent premium. The appraiser follows the pairs and notes in the report why the broker's view was given little weight.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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