Three colonial-style homes in the subject's subdivision sold recently. Sale 1 sold for $372,000 and has net adjustments of +$8,000. Sale 2 sold for $395,000 after being listed at $409,000, and has net adjustments of −$9,000. Sale 3 sold for $401,000 and has net adjustments of −$9,000. Based on comparability, the appraiser weights the adjusted prices of Sales 1, 2 and 3 at 60%, 25% and 15% and rounds the result to the nearest $1,000. What is the indicated value by the sales comparison approach?
Correct Answer
B) $383,000
First adjust each sale: $372,000 + $8,000 = $380,000; $395,000 − $9,000 = $386,000; $401,000 − $9,000 = $392,000. Then weight them: $228,000 + $96,500 + $58,800 = $383,300, which rounds to $383,000. Sale 2's listing price is not a sale price and plays no part. A simple average gives $386,000, reversing the weights gives $389,000, and weighting the unadjusted sale prices gives $382,100, rounded to $382,000.
Why This Is the Correct Answer
Option B is correct because the adjusted prices are $380,000, $386,000 and $392,000, and weighting them 60%, 25% and 15% gives $228,000 + $96,500 + $58,800 = $383,300. Rounded to the nearest $1,000, the indicated value is $383,000.
Why the Other Options Are Wrong
Option A: $382,000
Option A, $382,000, applies the weights to the unadjusted sale prices: $372,000 × 0.60 + $395,000 × 0.25 + $401,000 × 0.15 = $223,200 + $98,750 + $60,150 = $382,100, rounded to $382,000. The weights apply to the adjusted prices, giving $383,300, rounded to $383,000.
Option C: $386,000
Option C, $386,000, is the simple average ($380,000 + $386,000 + $392,000) / 3. It ignores the 60%, 25% and 15% weights; applying them gives $383,300, rounded to $383,000.
Option D: $389,000
Option D, $389,000, comes from reversing the weights ($380,000 × 0.15 + $386,000 × 0.25 + $392,000 × 0.60 = $388,700). The stated weights put 60% on Sale 1, giving $383,300, rounded to $383,000.
Adjust, then weight
Turn each sale price into an adjusted price first, then multiply each by its weight and add.
How to use: Use it on any weighted reconciliation that gives sale prices and net adjustments rather than adjusted prices.
Exam Tip
Check that the weights add to 100% and that you are weighting adjusted prices, not raw sale or listing prices. On the HP-12C, compute each product and sum before rounding.
Common Mistakes to Avoid
- -Applying the weights to unadjusted sale prices or to a listing price
- -Using a simple average when weights are given
- -Matching the weights to the wrong sales
Concept Deep Dive
Analysis
The question tests a weighted reconciliation in two steps: adjust each sale price by its net adjustment, then apply the stated weights to the adjusted prices. It also tests recognizing that a listing price is not part of the calculation.
Background Knowledge
Adjusted sale prices are the value indications the appraiser reconciles. A weighted average is one way to express the emphasis placed on the most comparable sales, and it must be explained in the report.
Real-World Application
An appraiser reconciles three colonial sales, placing 60% of the weight on the closest match and the rest on two sales with larger adjustments. The report shows each adjusted price, the weights and the reasons for them.
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’s analysis finds the market reacted to a comparable’s financing concession by its full dollar amount. Under Fannie Mae guidance, the adjustment may be:
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A verified pair of cash-equivalent sales in the same market has C2 at $672,000 and C4 at $615,000. Rights, terms, time and other material characteristics are matched. A suitable comparable sold for $598,000. The subject is C2; the comparable is C4. Assume the observed contribution applies and no other adjustments. What signed condition adjustment and adjusted comparable price result?