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.
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