Market data show buyers in a subdivision pay more for larger lots. The subject, a one-story ranch home there, is on a 9,400-sf lot, and the three comparables selected so far are on lots of 11,200 sf, 12,000 sf and 12,800 sf. Which additional sale would best bracket the subject's site size?
Correct Answer
C) A ranch on an 8,300-sf lot in the subdivision that closed four months ago
All three comparables are on larger lots, so the site size is not bracketed; a sale on a smaller lot is needed. The 8,300-sf sale is smaller than the subject's 9,400-sf lot, is an arm's-length sale in the same subdivision and is recent. The 7,900-sf sale is smaller but was between related parties at a reduced price, so it does not reflect market value. The 12,300-sf sale adds another larger lot, and the 9,400-sf sale matches the subject rather than falling below it.
Why This Is the Correct Answer
Option C is correct because the 8,300-sf lot is smaller than the subject's 9,400 sf while the existing sales are all larger, so it brackets the site size. It is also an arm's-length sale in the subject's subdivision that closed four months ago, so it is a valid comparable.
Why the Other Options Are Wrong
Option A: A ranch on a 12,300-sf lot in the subdivision that closed last month
Option A, the 12,300-sf lot, is a fourth sale on a larger lot. It is recent and nearby but leaves the subject's site size outside the range of the comparables.
Option B: A ranch on a 7,900-sf lot that a parent sold to a son at a reduced price
Option B, the 7,900-sf lot sold by a parent to a son at a reduced price, is smaller but is not an arm's-length transaction. Its price reflects the family relationship, not the market's reaction to a smaller lot.
Option D: A ranch on a 9,400-sf lot in a competing area that closed eleven months ago
Option D, the 9,400-sf lot in a competing area, matches the subject's lot size rather than falling below it, so it does not bracket. It also adds a location difference and an older sale date.
Other side, real sale
A bracketing sale must pass two gates: it lies on the other side of the subject, and it is a genuine market transaction.
How to use: Use this when choosing which candidate sale would complete a bracket.
Exam Tip
First decide which side of the subject the missing sale must be on, then rule out related-party sales, distant locations and stale dates.
Common Mistakes to Avoid
- -Adding another sale on the same side of the subject
- -Using a related-party sale because its lot size fits
- -Treating an equal sale as one that brackets
Concept Deep Dive
Analysis
Two steps are needed: first see that every current comparable is on a larger lot, so a smaller-lot sale is required to bracket site size; then screen the candidates for a market-value transaction in a comparable location. Only one candidate satisfies both tests.
Background Knowledge
Comparable sales should share the subject's physical and legal characteristics, including site. When the comparables all fall on one side of the subject for an element, the appraiser looks for a valid sale on the other side so the subject is bracketed and the adjustment can be checked.
Real-World Application
A subject sits on one of the smaller lots in a tract, and the first sales pulled are all on larger lots. The appraiser widens the search inside the tract and finds a recent sale on a smaller lot, which shows the subject's site falls within the range of the data.
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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Previous Question
A builder paid 2 discount points on a $300,000 buyer loan through a buydown program, and the house sold for $375,000. Market analysis shows the points raised the price by their full amount. What price indicates cash-equivalent value?
Next Question
The subject is a 1,900-sf ranch in average condition. Sale 1, a nearby 2,250-sf ranch, needs a new roof and kitchen; it was listed at $395,000 and sold for $372,000. Market data show the size difference is worth about $15,000 and the condition difference about $38,000. Where does Sale 1 belong when the appraiser ranks the sales against the subject?