Two land sales are identical except that one was a forced sale by a lender. How should this be handled?
Correct Answer
C) Adjust for conditions of sale or exclude the sale
Why this is correct: As the original explanation states, market value assumes parties act without undue duress. A forced sale (e.g., foreclosure) does not meet this condition, so it reflects the seller's distress, not open-market conditions. The governing principle is that only market transactions reflect market value. Therefore, the sale must be adjusted for the condition of sale if the effect can be measured, or excluded if it cannot. Why the other choices are wrong: Averaging the two prices to reach a market figure incorrectly mixes a non-market sale with market sales, contaminating the result. Use the forced sale, which shows the true floor is wrong because a forced sale may be below market value and does not establish a reliable "floor." Use both without adjustment, as both are sales fails to recognize the fundamental difference between a market sale and a forced sale. Exam tip: Forced sales are not market sales. Either adjust them or exclude them from your analysis.
Why This Is the Correct Answer
Why this is correct: As the original explanation states, market value assumes parties act without undue duress. A forced sale (e.g., foreclosure) does not meet this condition, so it reflects the seller's distress, not open-market conditions. The governing principle is that only market transactions reflect market value. Therefore, the sale must be adjusted for the condition of sale if the effect can be measured, or excluded if it cannot. Why the other choices are wrong: Averaging the two prices to reach a market figure incorrectly mixes a non-market sale with market sales, contaminating the result. Use the forced sale, which shows the true floor is wrong because a forced sale may be below market value and does not establish a reliable "floor." Use both without adjustment, as both are sales fails to recognize the fundamental difference between a market sale and a forced sale. Exam tip: Forced sales are not market sales. Either adjust them or exclude them from your analysis.
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