The sales comparison approach is usually given the most weight for:
Correct Answer
A) A commonly traded residence with abundant relevant verified competitive sales
Sales comparison can be especially persuasive for a commonly traded residence when relevant verified competitive sales are abundant. Actual reliance still depends on the assignment and evidence. Special purpose, newness or older sales alone does not universally determine the best approach.
Why This Is the Correct Answer
Option A is correct because the sales comparison approach is strongest when there are abundant relevant, verified sales of competing properties. For a commonly traded residence, these sales directly show how buyers and sellers price similar homes. Actual weighting still depends on the assignment and the quality of evidence.
Why the Other Options Are Wrong
Option B: A property whose owner prefers sales comparison over the other two approaches
Option B weights the approach because the owner prefers it. The weight given to an approach depends on data quality and relevance to the assignment, not on a party's preference.
Option C: Any property with no relevant sales evidence in its market
Option C chooses a property with no relevant sales evidence in its market. Without relevant sales, the sales comparison approach has little to work with, so it would usually receive less weight, not more.
Option D: A new prototype design with no sales of similar homes yet
Option D chooses a new prototype design with no sales of similar homes yet. The lack of comparable sales weakens the sales comparison approach, and the cost approach may be more useful for such a property.
More good sales, more weight
The weight of the sales comparison approach rises with the number and quality of relevant verified sales.
How to use: Use this when a question asks which property type best suits the sales comparison approach.
Exam Tip
Choose the answer that links approach weight to the quantity and quality of relevant market data.
Common Mistakes to Avoid
- -Letting a client or owner preference determine approach weighting
- -Giving sales comparison primary weight when no relevant sales exist
- -Assuming one approach is the best choice for all properties of a type regardless of the data
Concept Deep Dive
Analysis
This question tests when the sales comparison approach is most persuasive. Its reliability depends on the availability of relevant, verified, competitive sales. A commonly traded residence with plentiful good sales is the classic setting where it receives the most weight.
Background Knowledge
Each of the three approaches is weighted in reconciliation according to the quality and quantity of data and its relevance to the property type. Comparative sales are usually a more accurate index of market value than other evidence when good sales exist. For unique or newly designed properties with few sales, other approaches may carry more weight.
Real-World Application
An appraiser values a three-bedroom tract home in a subdivision with a dozen verified sales in the last six months. She develops the cost approach as a check but gives the sales comparison approach primary weight because the sales are close substitutes needing small adjustments.
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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Previous Question
A single-family home sold for $400,000. The buyer paid $40,000 in cash, obtained a $200,000 first mortgage from a bank at the market interest rate, and gave the seller a $160,000 second mortgage at 3% when similar second mortgages carried 7%. Local note investors pay about 80% of face value for seller-carried notes on these terms. What is the cash equivalent price of this sale?
Next Question
Two controlled cash-equivalent pairs in the same market isolate differences: A has 3 bedrooms and 2 garage bays at $410,000; B is otherwise identical with 4 bedrooms at $430,000; C is otherwise identical to A but has 1 garage bay at $395,000. A comparable at $380,000 has 3 bedrooms and 1 bay; the subject has 4 bedrooms and 2 bays. Apply only these supported differences. What adjustments and price result?