The subject is a 1,900-sf ranch in average condition. Sale 1, a nearby 2,250-sf ranch, needs a new roof and kitchen; it was listed at $395,000 and sold for $372,000. Market data show the size difference is worth about $15,000 and the condition difference about $38,000. Where does Sale 1 belong when the appraiser ranks the sales against the subject?
Correct Answer
A) Inferior overall to the subject
Ranking compares each sale with the subject on overall desirability, weighing all of its differences together. Sale 1 is superior in size by about $15,000 but inferior in condition by about $38,000, so it is inferior overall by roughly $23,000. Ranking it superior looks at size alone, ranking it equal assumes the differences offset, and dropping it ignores that ranking is built to handle sales with several differences. The $395,000 list price does not affect the ranking.
Why This Is the Correct Answer
Option A is correct because Sale 1's larger size is worth about $15,000 but its roof and kitchen needs cost it about $38,000 in the market. On balance it is about $23,000 less desirable than the subject, so it ranks inferior overall.
Why the Other Options Are Wrong
Option B: Superior overall to the subject
Option B, superior overall, ranks Sale 1 on its 2,250 sf alone. The $38,000 condition difference outweighs the $15,000 size advantage.
Option C: Equal overall to the subject
Option C, equal overall, assumes the size and condition differences offset. They do not: $38,000 against $15,000 leaves Sale 1 about $23,000 inferior.
Option D: Outside the ranking of the sales
Option D, outside the ranking, drops the sale because it differs in two ways. Ranking analysis is meant to weigh several differences together and place the sale in the array.
Rank the whole house
Buyers pay for the whole package, so a ranking adds up every difference before deciding better or worse.
How to use: Use this when a sale is better on one feature and worse on another.
Exam Tip
Net the differences in the direction buyers react to them before labeling a sale superior or inferior; ignore list prices when the sale price is known.
Common Mistakes to Avoid
- -Ranking a sale by its size alone
- -Assuming offsetting differences cancel exactly
- -Dropping a sale because it differs in more than one element
Concept Deep Dive
Analysis
The question tests the difference between ranking by one element and ranking by overall desirability. A sale can be superior on one feature and still be inferior overall when another difference matters more to buyers.
Background Knowledge
In ranking analysis each comparable is judged superior, inferior or similar to the subject overall. Market evidence of how buyers react to each difference guides that judgment, so a single prominent feature such as size does not decide the ranking on its own.
Real-World Application
A larger nearby ranch sold below the subject's likely value because it needed a roof and kitchen. The appraiser ranks it below the subject overall, which keeps the array consistent with how buyers in the neighborhood actually priced it.
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
Market data show buyers in a subdivision pay more for larger lots. The subject, a one-story ranch home there, is on a 9,400-sf lot, and the three comparables selected so far are on lots of 11,200 sf, 12,000 sf and 12,800 sf. Which additional sale would best bracket the subject's site size?
Next Question
While researching a two-story home, an appraiser talks with the listing agent for an active listing of the same model two doors from the subject. The agent says the house is listed at $479,000 and that buyers in the subdivision 'will pay $475,000 or more' for this model. Four verified closed sales of the same model over the past four months sold between $448,000 and $456,000, and the market has been stable. How should the appraiser treat the agent's statements?