The subject is a detached ranch home. Over the past year, the median sale price of competing detached homes in the neighborhood fell 0.2% per month, but most of this year's sales were small starter homes, while last year's were mostly larger move-up homes. Over the same months, a repeat-sales home price index for the area and five resales of unchanged competing homes each show values rising 0.3% per month. Which monthly rate should support the market conditions adjustments to the comparables?
Correct Answer
D) +0.3% per month
A median sale price follows whatever mix of homes happened to sell, so a shift from larger to smaller homes can pull the median down while values are rising. The home price index and the resales of unchanged homes hold the property constant and agree on +0.3% per month, so that rate supports the adjustments. The falling median, a zero rate because the signals conflict, and an average of the two all let the change in mix distort the trend.
Why This Is the Correct Answer
Option D is correct because the index and the resales of unchanged homes measure price change for the same property over time, and both show +0.3% per month. The median fell only because this year's sales were mostly smaller homes, a change in mix rather than in values.
Why the Other Options Are Wrong
Option A: −0.2% per month
Option A uses the −0.2% monthly change in the median sale price. The median fell because smaller homes made up most of this year's sales, so it measures the change in mix, not in market conditions.
Option B: 0% per month
Option B uses 0% because the median and the resales point in opposite directions. The conflict is explained by the change in mix, and the evidence that holds the property constant shows values rising 0.3% per month.
Option C: +0.05% per month
Option C averages the median's −0.2% and the resales' +0.3% to +0.05%. Averaging gives weight to a figure distorted by the change in mix and understates the measured +0.3% trend.
Medians move with the mix
A median follows whichever homes sold; a resale of the same unchanged home follows the market.
How to use: Use this when a median trend disagrees with resales or a price index.
Exam Tip
When the facts say the kind of homes selling changed between periods, distrust the median trend and look for evidence on the same or constant-quality homes.
Common Mistakes to Avoid
- -Reading a falling median as falling values when the mix of sales changed
- -Making no adjustment when two measures disagree
- -Averaging a distorted trend with a sound one
Concept Deep Dive
Analysis
The question tests the limits of a median price trend. A median reflects the mix of homes that sold; when the mix shifts, it can move opposite to values. Resales of unchanged homes and a repeat-sales index hold the property constant and isolate the effect of time.
Background Knowledge
Market conditions adjustments can be supported by home price indices, paired resales, statistical analysis or other accepted methods. Median and average prices are simple to read but shift with the size, age or quality of the homes that sold in each period, so an appraiser checks the mix before relying on them.
Real-World Application
In a suburb where a new phase of starter homes began closing, the neighborhood median dipped while repeat sales kept climbing. An appraiser bases the time adjustment on the resales and an index and explains the median's drop as a shift in the mix of sales.
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?
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According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
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Previous Question
An appraiser develops a $3,200 adjustment for a fireplace based on a single paired sale. The subject has a fireplace; Comparable A does not. The appraiser applies +$3,200 to Comparable A. Later, the appraiser identifies a second pair showing a $4,600 fireplace contribution. The appraiser replaces the original adjustment with $3,900 — the simple average — and applies it to Comparable A. What is the appropriate USPAP-compliant action regarding the adjustment amount?
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A retrospective appraisal of a condominium unit has an effective date of April 1. Market data show prices in the building were rising through the spring. The appraiser selects one sale with a February contract date and two with May and June contract dates. What does this choice of sale dates do?