Sales concessions in a submarket climb from rare to routine 3% seller credits within six months. Beyond adjusting individual comps, this trend tells the appraiser:
Correct Answer
C) Effective prices are falling ahead of nominal prices — the market is softening
Why this is correct: Seller-paid concessions (like closing cost credits) reduce the seller's net proceeds, effectively lowering the price. When they become routine, the nominal sale prices are inflated, masking an underlying market softening where effective prices are falling. Why the other choices are wrong: This is not a modernization of closing practices but a market signal. Concessions are relevant market data an appraiser must analyze. Buyers are not being generous; they are negotiating price reductions. Exam tip: Rising concessions = falling effective prices. Track the net to the seller.
Why This Is the Correct Answer
Why this is correct: Seller-paid concessions (like closing cost credits) reduce the seller's net proceeds, effectively lowering the price. When they become routine, the nominal sale prices are inflated, masking an underlying market softening where effective prices are falling. Why the other choices are wrong: This is not a modernization of closing practices but a market signal. Concessions are relevant market data an appraiser must analyze. Buyers are not being generous; they are negotiating price reductions. Exam tip: Rising concessions = falling effective prices. Track the net to the seller.
More Market Questions
Building permit data is most useful to an appraiser as:
In the neighborhood life cycle, what characterizes the decline stage?
In which phase of the real estate cycle do rising vacancies first meet a still-growing construction pipeline?
The principle of consistent use prohibits:
Employment in a one-industry town falls 20%. Through what mechanism does housing demand contract?
Frictional vacancy in a rental market refers to:
The principle of opportunity cost applied to real estate means:
A neighborhood with a wide range of property values requires the appraiser to:
In-migration to a metro area increases housing demand primarily by:
Absorption rate expressed in units per month is calculated by:
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