Several adjusted comparable sales each produce a value indication for the subject. What should the appraiser do to reconcile these indications within the sales comparison approach?
Correct Answer
C) Evaluate the evidence and explain the relative reliance on each sale
Reconcile the relevance, verification, similarity and support of the adjusted sales. A reasoned weighted average can be appropriate; neither an unreasoned average nor automatically selecting the smallest adjustment establishes the best indication.
Why This Is the Correct Answer
Option C is correct because reconciliation requires evaluating the relevance, verification, similarity and support of each adjusted sale and explaining how much weight each receives. The greatest weight should go to the sales closest in comparability to the subject. A reasoned weighted result is acceptable when it is explained.
Why the Other Options Are Wrong
Option A: Average all the adjusted prices equally, without further analysis
Option A, averaging all the adjusted prices equally without further analysis, ignores differences in comparability and data quality among the sales. An unreasoned simple average treats a weak sale the same as a strong one.
Option B: Choose the sale with the smallest gross adjustment amount
Option B, choosing the sale with the smallest gross adjustment amount, turns a useful indicator into a mechanical rule. Low gross adjustment often signals strong comparability, but the appraiser still has to weigh verification, relevance and support rather than mechanically picking one sale.
Option D: Use the highest adjusted sale price as the subject’s value indication
Option D, using the highest adjusted sale price as the subject's value indication, has no basis in comparability. Choosing the highest figure reflects a bias toward a higher value, not analysis of the evidence.
Weigh, don't just average
In reconciliation, the best sales carry the most weight, and the report explains why.
How to use: Use this when a question offers a mechanical shortcut such as a simple average or picking the highest sale.
Exam Tip
Prefer answers that call for evaluating the evidence and explaining reliance on each sale over answers that apply a single mechanical rule.
Common Mistakes to Avoid
- -Taking a simple average of adjusted prices without analysis
- -Mechanically selecting the sale with the smallest adjustments without considering data quality
- -Choosing the highest adjusted price to support a target value
Concept Deep Dive
Analysis
This question tests reconciliation (correlation) of the value indications from adjusted comparable sales. The appraiser should evaluate the quality of each sale and its adjustments and give the greatest weight to the sales most comparable to the subject. The best answer describes reasoned analysis and an explanation of reliance, not a mechanical shortcut.
Background Knowledge
Reconciliation within the sales comparison approach weighs the adjusted sale prices to reach a single indication for the subject. Appraisers consider how similar each sale is, how reliable its data are, and how large and well supported its adjustments are, then explain the weight given to each.
Real-World Application
Three adjusted sales indicate $402,000, $410,000 and $425,000. The appraiser notes that the $410,000 sale is in the same subdivision and needed few adjustments, gives it the most weight, and explains in the report why the other two received less.
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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A fourplex of two-bedroom units is the subject property. A nearby triplex of two-bedroom units of similar age and quality sold for $585,000 after being listed at $599,000. The triplex sale included a detached three-car garage, which market data show contributes $15,000; the subject has no garage. Buyers of small multi-unit buildings in this area pay a consistent price per unit for this unit type. What value does this sale indicate for the subject?