Two verified sales differ only in a real-property fireplace feature and sell for a cash-equivalent difference of $6,500. What does this matched pair provide?
Correct Answer
B) A paired-data indication of contributory value in these conditions
The controlled observed difference provides an indication of contributory value under the stated conditions. It does not measure installation cost or establish a universal adjustment. Confirm applicability and corroborate with further evidence as needed before relying on it elsewhere.
Why This Is the Correct Answer
Option B is correct because the $6,500 difference between two otherwise matched, verified sales is a paired-data indication of the fireplace's contributory value under those conditions. Paired sales are a recognized way to support adjustment rates, though corroboration is advisable before relying on one pair elsewhere.
Why the Other Options Are Wrong
Option A: The verified installation cost of a typical fireplace in the area
Option A calls the $6,500 the verified installation cost of a typical fireplace. A sales-price difference measures what the market paid for the feature, which can differ from what it costs to install.
Option C: A fixed $6,500 premium that applies to fireplaces in other markets
Option C treats $6,500 as a fixed premium for fireplaces in other markets. One pair reflects its own market and conditions, and contributions can differ elsewhere.
Option D: Evidence that must be discarded because two prices differ
Option D says the evidence must be discarded because the two prices differ. The price difference is exactly what paired data analysis uses to measure the feature's contribution.
Pairs price features, not costs
A matched pair shows what buyers paid for a feature in that market, not what it cost to build.
How to use: Use this to tell contributory value apart from cost on the exam.
Exam Tip
Distinguish market contribution from cost, and remember that one local pair is not a universal rule.
Common Mistakes to Avoid
- -Equating a feature's contributory value with its installation cost
- -Applying one market's paired result to other markets
- -Relying on a single pair without corroboration
Concept Deep Dive
Analysis
This question tests what a single matched pair of sales actually shows. When two verified sales differ only in a fireplace, the cash-equivalent price difference is an indication of the fireplace's contributory value in that market, not its cost or a universal premium.
Background Knowledge
Contributory value is the amount a component adds to the value of the whole, which may be more or less than its cost. Paired sales analysis isolates that contribution by comparing otherwise similar sales; a single pair is an indication that is stronger when supported by more evidence.
Real-World Application
An appraiser finds two identical tract homes on the same street, one with a fireplace, selling $6,500 apart on cash terms. The appraiser treats this as one indication of the fireplace's contribution and looks for additional pairs before finalizing the adjustment.
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