Sales ComparisonHARD16.4% of exam

The subject is a 1990s two-story home on the north side of Maple Run, a subdivision of similar homes that the MLS treats as one neighborhood. A school attendance boundary runs east to west through Maple Run. Over the past six months, three homes north of the boundary sold for $412,000 to $421,000, and three homes of similar size, age and condition south of it sold for $371,000 to $380,000. Four agents active in Maple Run and two recent buyers, interviewed separately, all say buyers here search by attendance zone and seldom consider homes on both sides. The county assessor values homes on both sides at the same rate per square foot. How should the appraiser define the market and select comparables?

Correct Answer

D) Treat the north side as the market and use the three sales north of the line

The market area is where the subject's demand comes from and where its competition lies. The interviews show that buyers shop by attendance zone, and the sales bear this out: homes alike in size, age and condition sell about $40,000 apart across the line. The competitive market is the north side, so the three north-side sales are the comparables. The MLS neighborhood and the assessor's uniform rate are administrative groupings, not evidence of how buyers behave; consistent interviews with agents and buyers are market evidence, not opinions to discard; and the south-side sales come from a different market, so a lower value drawn from them is not more prudent, only less accurate.

Answer Options

Treat Maple Run as one market and use all six sales, as the MLS does

Use the three south-side sales, as their lower prices give a conservative value

Set the interviews aside and use all six sales, since opinions are not sales

Treat the north side as the market and use the three sales north of the line

Why This Is the Correct Answer

Option D is correct because the agents and buyers agree that buyers search by attendance zone, and the $412,000 to $421,000 north-side prices against $371,000 to $380,000 on the south side show the boundary divides two markets. Comparables should be drawn from where the subject's competition is, which is the north side, and three similar sales are available there.

Why the Other Options Are Wrong

Option A: Treat Maple Run as one market and use all six sales, as the MLS does

Option A uses all six sales because the MLS treats Maple Run as one neighborhood. An MLS area is a listing convenience; the interviews and the $40,000 price gap show buyers on the north side do not treat south-side homes as substitutes.

Option B: Use the three south-side sales, as their lower prices give a conservative value

Option B uses the three south-side sales because their lower prices give a conservative value. Market value is not a conservative figure: the interviews and the $40,000 price gap show south-side homes do not compete with the subject, so their $371,000 to $380,000 prices understate its value.

Option C: Set the interviews aside and use all six sales, since opinions are not sales

Option C sets the interviews aside and uses all six sales because opinions are not sales. Consistent reports from agents and recent buyers are evidence of how the market behaves, and here the sale prices agree with them.

Where buyers shop, comps come

Ask who the subject's buyers would also consider; the homes they would consider are the market, whatever a map or MLS area says.

How to use: Use it when a neighborhood is split by a school line, a road or another boundary that buyers notice.

Exam Tip

When the price gap between physically similar homes lines up with what agents and buyers say, treat the boundary as a market boundary. Administrative areas such as MLS zones or assessment districts do not define a market by themselves.

Common Mistakes to Avoid

-Accepting an MLS neighborhood as the market without testing it
-Mixing sales from two markets and averaging the difference away
-Dismissing consistent interviews as mere opinion

Concept Deep Dive

Analysis

The question tests using interviews with market participants to define the competitive market before choosing comparables. The interviews say buyers treat the attendance zone as the market, and the price gap between physically similar homes on each side confirms it, so comparables should come from the subject's side of the boundary.

Background Knowledge

A market area is the area from which most of a property's demand comes and in which most of its competition lies. Interviews with agents and buyers are a recognized way to learn how buyers define that area, for example by school zone, and the result decides which sales are true substitutes for the subject.

Real-World Application

An appraiser in a subdivision split between two elementary schools hears from several agents that buyers filter their searches by school. The appraiser confirms a consistent price gap across the line and selects comparables from the subject's zone.

market areacompetitive marketschool attendance zoneinterviewscomparable selection

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Previous Question

The subject is a two-story home with a roof replaced last year. One nearby sale of a similar home was sold "as is"; the seller disclosed to buyers that its leaking roof needed replacement. The listing agent and the buyer both say the home was on the MLS for 38 days, typical for the area, and drew three offers; the buyer financed 80% of the price with a conventional loan. Market data show buyers pay less for homes that need roof replacement. How should the appraiser treat this sale?

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When an appraiser combines total-price and unit-of-comparison adjustments, which adjustments are made to the total sale price before conversion to a unit price?

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