A market-value assignment’s ordinary business research reveals the subject was transferred by gift eighteen months before the effective date. Must the appraiser consider that transfer under SR 1-5?
Correct Answer
A) Yes; SR 1-5 covers all transfers within three years, not only sales
When developing market value and the information is available in the normal course of business, SR 1-5(b) requires analysis of all subject sales and other transfers during the three years before the effective date. A gift is not excluded merely because it lacks an arm’s-length sale price; analyze its nature and relevance without treating nominal consideration as market value. SR 1-5(a) separately addresses current agreements of sale, options and listings.
Why This Is the Correct Answer
Option A is correct because SR 1-5(b) requires analysis of all sales and other transfers of the subject within the three years before the effective date when the information is available in the normal course of business. A gift eighteen months earlier falls inside that window, so it must be analyzed for its nature and relevance.
Why the Other Options Are Wrong
Option B: No; only arm’s-length cash sales count as transfers under SR 1-5
Option B is wrong because SR 1-5 is not limited to arm's-length cash sales. The rule covers all sales and other transfers, which includes a gift.
Option C: No; SR 1-5 looks only at transfers in the prior ninety days
Option C is wrong because SR 1-5 does not look only at the prior ninety days. The lookback period for subject transfers is three years before the effective date.
Option D: Yes; and its recorded consideration is used directly as market value
Option D is wrong because the gift's recorded consideration is not used directly as market value. A gift typically carries nominal or no consideration, so the appraiser analyzes it without treating that figure as market value.
Three years, all transfers
For subject history, look back three years and count all transfers, not just sales.
How to use: Use this when a question asks whether a past subject transfer must be analyzed.
Exam Tip
Watch for wrong time windows and for answers that narrow transfers to arm's-length sales.
Common Mistakes to Avoid
- -Ignoring non-sale transfers such as gifts
- -Using the wrong lookback period
- -Treating nominal consideration as market value
Concept Deep Dive
Analysis
This question tests the reach of Standards Rule 1-5(b). In a market value assignment, the appraiser must analyze all sales and other transfers of the subject within three years before the effective date, and a gift is a transfer.
Background Knowledge
SR 1-5(a) covers current agreements of sale, options and listings, while SR 1-5(b) covers prior sales and transfers within three years. Both apply when developing market value and the information is available in the normal course of business.
Real-World Application
A title search shows a parent deeded a house to an adult child as a gift last year. The appraiser reports the transfer, explains it was not a market transaction, and does not use the nominal consideration as an indicator of value.
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