Market data show that buyers in a subdivision of split-level homes pay more for larger homes and for better condition. For a 1,650-sf subject in average condition, the appraiser looks for sales that include both larger and smaller homes and both better-kept and worse-kept homes. Why does the appraiser want sales on both sides of the subject?
Correct Answer
B) The value is then bounded by market prices, not projected beyond them
When some sales are superior and some inferior to the subject, the subject is placed within the array of sales, so the market itself sets an upper and a lower limit on its value. If every sale were on one side, the value would have to be projected beyond the data by adjustments that all run in one direction, and any error in the adjustment rate would pass straight into the result. Bracketed sales still need adjustment, the value is not a simple average of the prices, and bracketing does not make large adjustments more reliable.
Why This Is the Correct Answer
Option B is correct because sales that are superior and inferior to the subject place it within the ranked array of market prices. The value is then shown between limits set by actual sales instead of being projected beyond them by one-way adjustments.
Why the Other Options Are Wrong
Option A: The sales then need no adjustment for size or condition
Option A says bracketed sales need no adjustment for size or condition. The sales still differ from the subject and still need adjustment; bracketing only means those adjustments run in both directions.
Option C: The value can then be taken as the average of the sale prices
Option C says the value can be taken as the average of the sale prices. Bracketing locates the subject between sales; the conclusion rests on how the subject compares with each sale, not on averaging their prices.
Option D: Larger adjustments then become acceptable without loss of reliability
Option D says larger adjustments become acceptable without loss of reliability. Large adjustments still weaken an indication; bracketing reduces the risk of a one-way error but does not make large adjustments reliable.
Fence posts on both sides
A fence needs a post on each side of the gate; bracketing sales are the posts that hold the subject's value between them.
How to use: Use this when a question asks why sales on both sides of the subject are preferred.
Exam Tip
If every sale is on one side of the subject, look for the answer that points to extrapolation and one-way adjustment error.
Common Mistakes to Avoid
- -Thinking bracketed sales need no adjustment
- -Averaging the bracketing sale prices to reach a value
- -Assuming bracketing makes large adjustments reliable
Concept Deep Dive
Analysis
The question tests the purpose of bracketing rather than its name. Sales on both sides of the subject let the value be located between known market prices; sales all on one side force the appraiser to extrapolate.
Background Knowledge
Bracketing means that for an important element the sales include at least one superior and at least one inferior to the subject. The subject then falls inside the range of market evidence, which is a stronger position than extrapolating from sales that are all better or all worse.
Real-World Application
An appraiser finds four sales, all larger than the subject. Before finishing, the appraiser searches again and adds a smaller sale so that the subject's size is bracketed and the size adjustment is tested from both directions.
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?
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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?
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