The appraiser of a 2,100-square-foot two-story house with four bedrooms has analyzed two sales: a dated 1,750-square-foot home that sold for $412,000 and is inferior, and a 2,600-square-foot home with a pool that sold for $498,000 and is superior. Closed sales of two-story homes of 1,950 to 2,300 square feet in the same subdivision during the past six months have not yet been reviewed. How should the appraiser narrow the bracket?
Correct Answer
C) Verify and rank the closer sales, then bracket with the nearest
A bracket of $412,000 to $498,000 is too wide to support a credible conclusion, and it is narrowed by adding sales more like the subject. The unreviewed sales of similar size in the same subdivision are likely to fall nearer the subject in the ranking, so verifying and ranking them lets the appraiser bracket with the closest inferior and superior sales. Taking the midpoint leaves the width untouched, sales below $412,000 cannot raise the floor, and the larger sale is less similar, not more reliable.
Why This Is the Correct Answer
Option C is correct because sales of similar size in the same subdivision are the most likely to rank just above or just below the subject. Once verified and ranked, the highest-priced inferior and lowest-priced superior among them tighten the bracket far inside $412,000 to $498,000.
Why the Other Options Are Wrong
Option A: Conclude at $455,000, the midpoint of the two sale prices
Option A takes the $455,000 midpoint of $412,000 and $498,000. A midpoint assumes the subject is equally far from each sale, which nothing shows, and it leaves the $86,000 spread unexplained.
Option B: Add sales priced below $412,000 to strengthen the lower limit
Option B adds sales priced below $412,000. An inferior sale below the current floor cannot raise the lower limit, so the bracket stays as wide as before.
Option D: Weight the $498,000 sale most because it is the larger home
Option D gives the most weight to the $498,000 sale because it is larger. At 2,600 square feet with a pool, it differs more from the subject than the unreviewed sales do, so size is a reason for less weight, not more.
Closer sales, tighter brackets
The bracket narrows when the nearest inferior sale moves up and the nearest superior sale moves down, which only more similar sales can do.
How to use: Use it when a ranked array leaves too wide a range for a credible conclusion.
Exam Tip
When the choices include averaging versus gathering better data, look at whether the stem mentions available sales that are more similar. Better comparables usually beat arithmetic on poor ones.
Common Mistakes to Avoid
- -Using the midpoint of a wide bracket as the value
- -Adding sales outside the bracket to make it more reliable
- -Giving the largest or most expensive sale the most weight
Concept Deep Dive
Analysis
The question tests what makes a bracket useful. A bracket narrows only when sales closer to the subject are added on either side; averaging or adding more distant sales does not change its width. Recognizing that better data are available is part of the judgment.
Background Knowledge
Bracketing gives a range, and its usefulness depends on how close the bracketing sales are to the subject. Sales that differ greatly from the subject produce a wide range that does not support a point conclusion.
Real-World Application
An appraiser's first search returns only a small older home and a large pool home around a mid-size subject. Expanding the search to the subject's own subdivision turns up three sales of similar size, which bracket the subject within a few percent.
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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