Several units of comparison could apply to a small apartment building. What should the appraiser do?
Correct Answer
A) Derive the units, compare results and examine why they vary
When several units of comparison apply, the appraiser should derive all appropriate units, compare the results and examine the reasons for variation, which helps select the most reliable unit.
Why This Is the Correct Answer
Option A is correct because the appraiser should derive all appropriate units of comparison, compare the results and examine the reasons for variations. This process helps in selecting the most reliable unit for the small apartment building.
Why the Other Options Are Wrong
Option B: Choose price per square foot and ignore the other units
Option B picks price per square foot and ignores the other units. Choosing one unit without testing the others skips the analysis needed to find the most reliable unit.
Option C: Use the unit that gives the result closest to the contract price
Option C uses the unit that gives the result closest to the contract price. Selecting a unit to match the contract price is biased toward a predetermined result rather than based on reliability.
Option D: Average the possible units without examining their differences
Option D averages the possible units without examining their differences. Averaging hides the reasons the units vary, which is exactly what the appraiser needs to analyze.
Derive, Compare, Explain
When several units fit, derive them all, compare the results, and explain the differences before choosing.
How to use: Use this when a question asks how to choose among competing units of comparison.
Exam Tip
Avoid choices that select a unit to match the contract price or that average without analysis.
Common Mistakes to Avoid
- -Using only one unit of comparison without testing others
- -Selecting the unit that best matches the contract price
- -Averaging indications without examining their variation
Concept Deep Dive
Analysis
This question tests how to handle multiple possible units of comparison. Rather than picking one arbitrarily, the appraiser derives all appropriate units, compares the results and examines why they differ. That analysis helps identify the most reliable unit for the property.
Background Knowledge
For apartment buildings, units of comparison might include price per square foot, price per apartment unit, price per room and gross rent multiplier. Different units can produce different indications, and studying why they vary reveals which best reflects how the market prices the property.
Real-World Application
Appraising a 12-unit building, an appraiser calculates price per unit, per square foot and gross rent multiplier from comparable sales. Price per unit shows the tightest range, and the appraiser explains why it is the most reliable for this market.
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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