Three sales from the subject's subdivision need gross adjustments of 7% to 8% of sale price for living area and garage, supported by paired sales. Two sales from a different market area need gross adjustments of about 6%, nearly all for location, with little market data behind that adjustment. How should the sales be weighed?
Correct Answer
C) More weight to the subdivision sales, because their adjustments have stronger market support.
Accuracy depends on the amount, the number and the type of adjustments, and location adjustments can be especially hard to support with market data. The outside sales have slightly smaller gross adjustments, but those adjustments rest on little evidence, while the subdivision sales' adjustments are supported by paired sales. Weighing reliability as well as size favors the subdivision sales.
Why This Is the Correct Answer
Option C is correct because the subdivision sales' adjustments are supported by paired sales, while the outside sales depend on a location adjustment with little market data behind it. The type of adjustment affects accuracy, and location adjustments are often the hardest to support, so the better-supported sales deserve more weight.
Why the Other Options Are Wrong
Option A: More weight to the two outside sales, because their gross adjustments are smaller.
Option A favors the outside sales because their gross adjustments of about 6% are smaller than 7% to 8%. Size matters, but the difference is small and those adjustments rest on little evidence, so their indications are less reliable.
Option B: Equal weight to all five sales, because their gross adjustments are similar in size.
Option B gives equal weight because the gross adjustments are similar in size. Similar size does not mean similar reliability; the poorly supported location adjustment makes the outside sales weaker.
Option D: More weight to the outside sales, because the location adjustment moves them into the subject's market.
Option D says the location adjustment moves the outside sales into the subject's market. An adjustment only estimates the location difference; if it lacks market support, the outside sales remain less reliable than sales from the subject's own subdivision.
Support beats size
A smaller adjustment is not better if nobody can prove it. Weigh how well each adjustment is supported, with location adjustments needing extra scrutiny.
How to use: Use this when gross adjustment percentages are close but one group relies on a weakly supported adjustment.
Exam Tip
When gross adjustment percentages are close, look at what the adjustments are for and how well the stem says they are supported.
Common Mistakes to Avoid
- -Weighting sales by gross adjustment size without regard to support
- -Assuming a location adjustment makes an outside sale equivalent to an internal one
- -Giving equal weight to sales whose adjustments differ in reliability
Concept Deep Dive
Analysis
This question requires a judgment between two plausible guides. Gross adjustment size favors the outside sales slightly, but the type and support of the adjustments favor the subdivision sales. A small adjustment that is poorly supported can be less reliable than a somewhat larger one backed by paired sales.
Background Knowledge
The accuracy of a value indicator depends on the amount of comparable data, the number and type of adjustments, and the dollar amount of adjustments. Some adjustments, notably location, are hard to support with market data. Reconciliation considers how well supported each adjustment is, not only its size.
Real-World Application
An appraiser in a small subdivision has three internal sales and two from a nearby town with different schools. Without paired data for the location difference, the appraiser relies most on the internal sales and uses the outside sales as support.
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