The subject sits just inside a top-rated school attendance zone; an otherwise perfect comparable sits two blocks away, outside it. That comparable may require:
Correct Answer
C) A location adjustment supported by verified market evidence
A verified difference in market response to otherwise comparable locations can support a location adjustment. The school attendance boundary is not itself a dollar adjustment; evidence of its effect on comparable property prices is required.
Why This Is the Correct Answer
Option C is correct because the comparable is outside the top-rated school zone, a locational difference from the subject. If verified market evidence shows buyers pay differently for that zone, a supported location adjustment is warranted.
Why the Other Options Are Wrong
Option A: A fixed adjustment based on the tax bill alone
Option A, a fixed adjustment based on the tax bill alone, measures the wrong thing. Property taxes do not show the market's response to the school zone difference.
Option B: An automatic adjustment of construction cost
Option B, an automatic adjustment of construction cost, confuses location with physical cost. The difference here is location, not construction, and adjustments should reflect market response.
Option D: No investigation, because school zones do not affect price
Option D, no investigation because school zones do not affect price, assumes away a potentially important location factor. School zones can affect buyer demand, so the appraiser should check the market evidence.
Same street, different zone
Two blocks can make a location difference if buyers pay for it; let market data measure it.
How to use: Use this when comparables sit across a boundary such as a school zone.
Exam Tip
For location differences, choose the answer that supports an adjustment with market evidence, not taxes, costs or assumptions.
Common Mistakes to Avoid
- -Using tax bills to measure location differences
- -Assuming nearby comparables need no location adjustment
- -Applying cost-based adjustments to location differences
Concept Deep Dive
Analysis
This question tests location adjustments for differences such as school attendance zones. An adjustment for location is required when the comparable's locational characteristics differ from the subject's. The amount must be supported by evidence of how the market responds to that difference.
Background Knowledge
Location is one of the primary elements of comparison, and even nearby properties can differ in locational appeal. School attendance boundaries, traffic and views can create price differences that must be measured with market data.
Real-World Application
An appraiser notices that homes just inside a popular school boundary sell for more than nearly identical homes just outside it. Paired sales across the boundary support the location adjustment applied to a comparable outside the zone.
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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An appraiser can find only three sales in a rural market, and the best one closed 14 months ago. What is the proper course?
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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?