Resales of the same renovated condo model, one year apart, differ by 4% with no unit differences. The cleanest use of this pair is:
Correct Answer
A) A 4% annual market-conditions rate for that submarket
Why this is correct: This scenario presents an ideal paired sale for estimating a market conditions (time) adjustment. The two sales are of identical units, eliminating all physical and locational differences. The 4% price difference over one year is attributed solely to market changes, providing a direct indication of the annual appreciation rate for that specific property type and location. Why the other choices are wrong: "A renovation premium of 4%" is incorrect because the units are described as identical; no renovation occurred. "A 4% location premium for the upper floors" is wrong because the units are the same model, presumably in the same building. "An operating expense ratio input" is unrelated to paired sales analysis for market conditions. Exam tip: A resale of the same unit is the gold standard for time adjustments because it perfectly controls for all property-specific variables.
Why This Is the Correct Answer
Why this is correct: This scenario presents an ideal paired sale for estimating a market conditions (time) adjustment. The two sales are of identical units, eliminating all physical and locational differences. The 4% price difference over one year is attributed solely to market changes, providing a direct indication of the annual appreciation rate for that specific property type and location. Why the other choices are wrong: "A renovation premium of 4%" is incorrect because the units are described as identical; no renovation occurred. "A 4% location premium for the upper floors" is wrong because the units are the same model, presumably in the same building. "An operating expense ratio input" is unrelated to paired sales analysis for market conditions. Exam tip: A resale of the same unit is the gold standard for time adjustments because it perfectly controls for all property-specific variables.
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