Seller-paid rate buydowns spread through a market as rates spike. For comparables sold with buydowns, the appraiser should:
Correct Answer
C) Measure their effect on price and adjust where the market shows one
Why this is correct: Appraisers must analyze market data empirically. If comparable sales with seller-paid rate buydowns show no price premium compared to sales without them, the market has absorbed the concession and no adjustment is needed. If they do show a premium, the appraiser measures that effect and makes an adjustment. The rule is to follow the market evidence. Why the other choices are wrong: 'Ignore buydowns since everyone offers them' is incorrect because prevalence doesn't negate analysis. 'Add the buydown cost to every sale price' is a mechanical, non-empirical approach. 'Convert every sale to last year's interest-rate environment first' is not a standard appraisal practice. Exam tip: For financing concessions, always analyze their effect on price through paired sales or market evidence, never apply automatic adjustments.
Why This Is the Correct Answer
Why this is correct: Appraisers must analyze market data empirically. If comparable sales with seller-paid rate buydowns show no price premium compared to sales without them, the market has absorbed the concession and no adjustment is needed. If they do show a premium, the appraiser measures that effect and makes an adjustment. The rule is to follow the market evidence. Why the other choices are wrong: 'Ignore buydowns since everyone offers them' is incorrect because prevalence doesn't negate analysis. 'Add the buydown cost to every sale price' is a mechanical, non-empirical approach. 'Convert every sale to last year's interest-rate environment first' is not a standard appraisal practice. Exam tip: For financing concessions, always analyze their effect on price through paired sales or market evidence, never apply automatic adjustments.
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Previous Question
Two recently sold properties are nearly identical: both are 1,800-square-foot brick ranches on 0.25-acre lots, with updated kitchens and no garage. Comparable X has a screened porch (200 sq ft) and sold for $378,500; Comparable Y lacks a screened porch and sold for $369,900. The appraiser notes that both sales occurred in the same week, with no financing or seller concessions. What is the appropriate adjustment to apply to a subject property *with* a screened porch when using Comparable Y as the benchmark?
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Three matched pairs isolate a swimming pool at $10,500, $11,000 and $18,000. How should the appraiser proceed?