Similar homes in a neighborhood typically sell in about 120 days. A listing has been on the market 90 days at $400,000, reduced to $385,000 after 60 days, and is still unsold. What is the most reasonable conclusion?
Correct Answer
C) Its time is still typical; the price should be tested against competition
At 90 days the listing is still within the typical 120-day period, so time on market alone shows no problem. A price reduction may signal overpricing, but that must be tested against competing listings and recent sales. Neither fact proves a market decline or validates either price.
Why This Is the Correct Answer
Option C is correct because at 90 days the listing is still within the typical 120-day marketing period, so time on market alone shows no problem. The price reduction may hint at overpricing, but that should be tested against competing listings and recent sales. Neither fact by itself proves a market decline or validates either price.
Why the Other Options Are Wrong
Option A: It is overpriced, because the seller has already had to reduce the price
Option A is wrong because it concludes the home is overpriced just because the seller reduced the price. A reduction may signal overpricing, but sellers reduce prices for many reasons, and the claim must be tested against competition before it is concluded.
Option B: The market has declined since it was listed, so values have fallen
Option B is wrong because it concludes the market has declined and values have fallen based on one listing. A single listing's reduction and unsold status, within a typical marketing time, do not prove a market-wide decline.
Option D: Its original price was correct, because 90 days is under the average
Option D is wrong because it claims the original price was correct because 90 days is under the average. Being within typical marketing time does not validate the original $400,000 price, especially since the seller later reduced it to $385,000.
Compare to typical, then test
First ask whether the time on market is normal for the area; then test the price against competing listings and sales. One listing's history is a clue, not a verdict.
How to use: Use this two-step check whenever a question gives a listing's days on market and price changes.
Exam Tip
Compare marketing time with the stated typical period, and prefer answers that call for testing against competition rather than drawing firm conclusions from one listing.
Common Mistakes to Avoid
- -Treating any price reduction as proof of overpricing
- -Inferring a market-wide decline from one listing
- -Assuming a typical marketing time validates the original price
Concept Deep Dive
Analysis
This question tests careful interpretation of listing history against typical market behavior. The listing has been on the market 90 days, while similar homes typically take about 120 days. The price reduction is a possible signal, but it must be tested against competing listings and sales before drawing conclusions.
Background Knowledge
Days on market and price changes are useful indicators of how a listing compares with the market, but they must be interpreted against typical marketing times and competing properties. Appraisers test such signals with comparable listings and sales rather than drawing conclusions from a single listing's history.
Real-World Application
An appraiser reviewing a subject's listing history sees a price cut after 60 days and no sale at 90 days, in a market where homes typically sell in about 120 days. The appraiser compares the current list price with competing listings and recent sales before commenting on whether it is in line with the market.
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