The subject home backs onto a four-lane arterial road. The appraiser finds one pair of recent sales that isolates the effect of backing onto the arterial, indicating prices about 6% lower. Separate interviews with three local brokers and two recent buyers in the neighborhood consistently describe buyers discounting such homes by about 5% to 7%. How should the appraiser use the interviews?
Correct Answer
C) Treat them as corroboration for the pair's indication and describe both in the report
An adjustment drawn from a single pair of sales may not be valid on its own, but consistent interviews with brokers and buyers active in the market are market evidence that can corroborate it. Here the interviews (5% to 7%) agree with the pair (about 6%), so together they give the adjustment a reasonable basis, and the report should describe both data sources. Making no adjustment ignores a real market reaction, replacing the pair with opinion discards the better data, and the cost of a wall is not the market's reaction.
Why This Is the Correct Answer
Option C is correct because interviews with brokers and recent buyers reflect how the market reacts, and their 5% to 7% range agrees with the pair's 6%. Used together, the two sources support an adjustment better than either alone. The report should detail the data sources behind the adjustment so a reader can see its basis.
Why the Other Options Are Wrong
Option A: Set them aside and make no adjustment, since one pair is too thin to rely on
Option A sets the interviews aside and makes no adjustment because one pair is thin. Thin paired data call for more evidence, not for ignoring a market reaction that both the pair and the interviews show.
Option B: Apply the brokers' figure in place of the pair, since brokers set prices locally
Option B applies the brokers' figure in place of the pair. The interviews are useful as corroboration, but they are opinions, while the pair is an observed price difference; discarding the sale data in favor of opinion weakens the analysis.
Option D: Base the adjustment on the cost of a sound wall, since the market data are thin
Option D bases the adjustment on the cost of a sound wall. Cost to cure a nuisance is not the same as the market's price reaction to it, and here the market evidence already points to a range of about 5% to 7%.
One pair needs a partner
A single pair is a hint; consistent interviews with market participants can turn it into support.
How to use: Use this when the facts give one pair plus interview evidence that agrees with it.
Exam Tip
Choose the option that combines agreeing sources and reports them, rather than one that discards either the sales or the interviews.
Common Mistakes to Avoid
- -Making no adjustment because paired data are limited
- -Using cost to cure in place of the market's reaction
- -Letting opinions replace observed sale data
Concept Deep Dive
Analysis
The question tests how interviews with market participants support an adjustment when paired data are thin. One pair is weak evidence by itself, and opinions alone are weak too, but when they agree they reinforce each other. The appraiser uses both and reports the sources.
Background Knowledge
Paired sales analysis is a common source of adjustments, but a single pair may not be valid. Interviews with brokers, buyers, and sellers active in the market can confirm or question what limited sales data show. Adjustments must come from market data, and the report should state the data sources used.
Real-World Application
An appraiser values a home backing onto a busy road and finds just one usable pair. Calls to three active brokers and two recent buyers give consistent discounts, which she cites in her addendum alongside the pair.
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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