This week an appraiser's assignments include a vacant building lot in a subdivision where lots of similar size sell for about the same price, a detached single-family home, and a fourplex. Which units of comparison best fit these three properties, in that order?
Correct Answer
B) Price per site; price per square foot of GLA; price per unit
A unit of comparison should reflect how buyers and sellers in the segment actually price property. Where lots of similar size sell for about the same price, buyers price the whole site; single-family homes are commonly compared by the whole property or price per square foot of gross living area; small multi-unit buildings are commonly compared by price per unit. The other sets assign units that the market for these properties does not use, such as price per unit for a single-family home.
Why This Is the Correct Answer
Option B is correct because it follows market behavior in each segment: lots of similar size that sell for about the same price are priced per site, single-family homes are commonly compared by price per square foot of gross living area, and 2–4 unit buildings are commonly compared by price per unit.
Why the Other Options Are Wrong
Option A: Price per square foot of lot; price per room; price per square foot of GLA
Option A uses price per square foot of lot for the lots and price per room for the house. Where similar-size lots sell for about the same price, a per-square-foot rate adds nothing, and price per room is not the common unit for a single-family home.
Option C: Price per front foot; price per unit; price per square foot of GLA
Option C uses price per front foot for the lots, price per unit for the house and price per square foot of GLA for the fourplex. A single-family home is one unit, so price per unit tells nothing, and fourplex buyers typically compare price per unit.
Option D: Price per acre; price per bedroom; price per site
Option D uses price per acre, price per bedroom and price per site. Acreage pricing fits rural or agricultural land rather than subdivision lots, and neither price per bedroom for the house nor price per site for the fourplex reflects how those buyers compare property.
Price it how buyers count
Lots are counted by site, houses by living area, small rentals by units: use the unit buyers count with.
How to use: Use it when a question asks which unit of comparison fits a residential property type.
Exam Tip
Pick the unit that reflects the market for the specific property type. A unit that fits one segment, such as price per unit, can be meaningless for another.
Common Mistakes to Avoid
- -Using price per square foot of land where buyers pay about the same for each site
- -Applying price per unit to a single-family home
- -Using price per square foot of GLA as the main unit for 2–4 unit buildings when the market prices by unit
Concept Deep Dive
Analysis
The question tests matching a unit of comparison to the way each residential segment is priced. Ask what buyers of each property type actually pay for: a whole site, living area, or rentable units.
Background Knowledge
Units of comparison reduce sale prices to a common basis, such as per square foot, per unit or the whole property. The appraiser chooses the unit that reflects how buyers and sellers in the market think, and the unit should show a pattern of prices.
Real-World Application
In a subdivision where builders pay about the same for any standard lot, an appraiser compares lot sales per site. For a fourplex across town, the same appraiser compares sales of small multi-unit buildings by price per unit.
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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A comparable where the seller paid points on the buyer's new loan should be analyzed as:
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Four closed sales are ranked from most to least desirable overall for a 2,180-sf two-story home that is currently listed for sale at $459,900: Sale 3, $471,000; Sale 1, $458,000; Sale 4, $446,500; Sale 2, $437,000. The subject is judged inferior to Sales 3 and 1 and superior to Sales 4 and 2. What value range does the ranking indicate for the subject?