In a market-value appraisal, the subject is under a current agreement of sale at $500,000 with $15,000 in seller credits, and the agreement is available in the normal course of business. What does SR 1-5(a) require?
Correct Answer
C) Analyze the agreement, including its price, terms and concessions
For a market-value opinion, SR 1-5(a) requires analysis of available current agreements of sale, options, and listings in the normal course of business. Evaluate relevant terms and concessions rather than merely copying or ignoring the headline price. Analysis does not require adopting the contract price, nor does a $15,000 credit automatically produce a $15,000 value adjustment.
Why This Is the Correct Answer
Option C is correct because SR 1-5(a) requires the appraiser to analyze all agreements of sale, options, and listings of the subject current as of the effective date when they are available in the normal course of business. That analysis covers the price and the terms, including the $15,000 in seller credits. The appraiser then decides what the agreement indicates about market value rather than treating it as the answer.
Why the Other Options Are Wrong
Option A: Ignore the available agreement so it does not anchor the opinion
Option A, ignoring the available agreement so it does not anchor the opinion, conflicts with SR 1-5(a), which requires analysis of a current agreement of sale. Avoiding bias is achieved by careful, impartial analysis, not by skipping required data.
Option B: Adopt the $500,000 contract price as the market value
Option B, adopting the $500,000 contract price as the market value, confuses a contract price with a value opinion. The agreement must be analyzed, and its price and terms may or may not reflect market value.
Option D: Use the $500,000 price but disregard the $15,000 in seller credits
Option D, using the $500,000 price while disregarding the $15,000 in seller credits, skips part of the required analysis. Concessions are terms of the agreement that must be considered, although a $15,000 credit does not by itself mean a $15,000 value adjustment.
Analyze, don't adopt or ignore
Think of the contract as evidence on the table: you examine it closely, but you neither throw it away nor stamp it as the value.
How to use: Use this when an answer choice either discards a subject contract or copies its price as the value.
Exam Tip
When a question cites SR 1-5, look for the choice that says analyze, including terms and concessions. Choices that ignore the contract or adopt its price outright usually miss the requirement.
Common Mistakes to Avoid
- -Treating the contract price as the market value
- -Ignoring the subject's current agreement of sale to avoid being influenced
- -Assuming a seller credit requires a dollar-for-dollar value adjustment
Concept Deep Dive
Analysis
This question tests the SR 1-5(a) duty to analyze current agreements of sale, options, and listings of the subject in a market-value assignment. The key word is analyze: the appraiser studies the agreement's price, terms, and concessions and considers how they relate to market value. Analysis is neither ignoring the contract nor copying its headline price into the value opinion.
Background Knowledge
SR 1-5 requires analysis of current agreements of sale, options, and listings of the subject, and of sales and other transfers of the subject within the three years before the effective date, when that information is available in the normal course of business. Seller concessions can affect how a contract price relates to market value, so the appraiser studies them rather than accepting or deleting them mechanically.
Real-World Application
An appraiser receives a purchase contract at $500,000 that includes $15,000 toward the buyer's closing costs. The appraiser reviews the contract terms, compares concession levels in recent comparable sales, and explains in the report how the credits were considered in reaching the market-value opinion.
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