Market conditions adjustments should be based on:
Correct Answer
D) Market data for that type and area
Use evidence applicable to the subject’s competitive property segment, dates and market conditions. National trends or general economic measures may supply context but do not alone establish the required adjustment. Experience should be supported by analysis, and the nearest geography is not automatically the most representative source. Investigate data quality and composition as well as observed change.
Why This Is the Correct Answer
Option D is correct because a market conditions adjustment should be measured with market data for the same property type and the relevant location. Different types of property can respond to different economic forces, so evidence from the subject's competitive segment is what shows how prices actually changed. National or general economic data may provide background but do not alone establish the adjustment.
Why the Other Options Are Wrong
Option A: General economic indicators alone
Option A relies on general economic indicators alone. Measures such as broad economic statistics can provide context, but they do not show how prices for the subject's property type in its market actually changed over the period.
Option B: National real estate trends alone
Option B relies on national real estate trends alone. National trends blend many different markets and property types, so they cannot by themselves establish the change in the subject's specific competitive market.
Option C: The appraiser's general experience
Option C relies on the appraiser's general experience. Experience helps an appraiser interpret data, but an adjustment must be supported by analysis of relevant market evidence rather than by general impressions.
Same type, same place
Measure time adjustments with sales of the same type of property in the same market. If the data describe a different market, they can only provide context.
How to use: Use this to eliminate answer choices that rely on national, economic or experience-only support for a time adjustment.
Exam Tip
Answers containing the word alone attached to broad national or economic data are usually describing context, not adequate support for a market conditions adjustment.
Common Mistakes to Avoid
- -Applying a national price index directly as the time adjustment
- -Basing a time adjustment on gut feel without supporting data
- -Using sales of a different property type to measure market change
Concept Deep Dive
Analysis
This question tests where the support for a market conditions (time) adjustment should come from. Different property types and locations can move at different rates, so the adjustment needs evidence from the subject's own competitive segment. Broad national or economic data can give context, but they do not by themselves measure what happened in the subject's market.
Background Knowledge
The market conditions adjustment accounts for changes in prices between a comparable's sale date and the effective date of the appraisal. It is typically measured using techniques such as paired sales, resales of the same property or trend analysis of sales of the same property type in the relevant market. The quality and composition of the data, not just the observed change, should be checked.
Real-World Application
National headlines report home prices rising, but local sales of condominiums in the subject's complex and nearby competing buildings have been flat for a year. The appraiser analyzes those condominium sales and resales and finds no supported time adjustment. The report explains that the local segment data, not national news, support that conclusion.
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