Three sales support $520,000; the borrower's purchase contract is $505,000. May the appraisal conclude above the contract price?
Correct Answer
B) Yes, if independent analysis, including the contract, supports it
A supported market-value opinion can exceed a purchase contract price. Analyze the subject contract and relevant terms rather than treat it as a cap, floor or a comparable identical to other market evidence. Independent supported analysis governs the conclusion.
Why This Is the Correct Answer
Option B is correct because a supported market value opinion can exceed the contract price when independent analysis, including analysis of the contract and its terms, justifies it. Here three sales support $520,000, and the appraiser may report a value above the $505,000 contract if the evidence supports it.
Why the Other Options Are Wrong
Option A: No, because the purchase contract caps the market value of the home
Option A says the purchase contract caps market value. A contract price is one piece of evidence to analyze; it does not set an upper limit on a supported value opinion.
Option C: Yes, if the lender authorizes a higher desired value for the loan
Option C allows a higher value if the lender authorizes a desired value. An appraiser's opinion must be independent; a client's desired value is not a basis for the conclusion.
Option D: Yes, by splitting the difference between the sales and the contract
Option D splits the difference between the sales and the contract. Averaging is a mechanical shortcut rather than a reasoned reconciliation of the evidence.
Contract is evidence, not ceiling
Treat the contract like a witness to question, not a judge whose ruling you must follow.
How to use: Use this when a choice treats the contract as a limit or target for value.
Exam Tip
Answers built on client pressure or simple averaging do not reflect independent, supported analysis.
Common Mistakes to Avoid
- -Treating the contract price as the maximum value
- -Letting the lender's needs influence the value opinion
- -Averaging the contract price with the comparable indications
Concept Deep Dive
Analysis
This question tests whether the purchase contract limits the market value opinion. The contract is important data that must be analyzed, but it is neither a cap nor a floor. The appraiser's conclusion rests on independent, supported analysis of all relevant evidence, including the contract.
Background Knowledge
Appraisers analyze the subject's current agreement of sale as part of the assignment. Contract prices can reflect negotiation, terms or motivations that differ from typical market conditions. The final opinion of value rests on the appraiser's independent analysis of the market evidence.
Real-World Application
A buyer negotiated a $505,000 price from a relocating seller who needed a quick sale. The appraiser's three best sales support $520,000, and after analyzing the contract terms, the appraiser reports $520,000 with an explanation of the difference.
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?
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