What is a recognized weakness of paired sales analysis?
Correct Answer
D) Matching pairs are often scarce, and one pair alone may not be valid
Paired sales analysis can measure any element of comparison in theory, but there is often an insufficient number of applicable pairs, and an adjustment from a single pair may not be valid. It is a direct subtraction method, not a regression model.
Why This Is the Correct Answer
Option D is correct because there is often an insufficient number of applicable paired sales, especially for commercial properties. In addition, an adjustment estimated from only a single pair of sales may not be valid.
Why the Other Options Are Wrong
Option A: It can measure market conditions, but not physical differences
Option A says paired sales can measure market conditions but not physical differences. Paired sales can be used for physical differences as well, such as a garage or fireplace, so this is not the weakness.
Option B: It requires a regression model containing many variables
Option B says paired sales require a regression model with many variables. Paired sales analysis is a direct comparison of matched sales, not a regression method.
Option C: It produces percentage adjustments that cannot be stated in dollars
Option C says paired sales produce percentage adjustments that cannot be stated in dollars. A paired comparison can produce either a dollar or a percentage indication, and percentages can be converted to dollars.
Pairs are rare
Good matching pairs are hard to find, and a single pair is a weak basis for an adjustment.
How to use: Use this when asked about the main drawback of paired sales analysis.
Exam Tip
Separate paired sales from regression; paired sales is a direct comparison method.
Common Mistakes to Avoid
- -Thinking paired sales cannot measure physical differences
- -Confusing paired sales with regression analysis
- -Relying on a single pair as a firm adjustment
Concept Deep Dive
Analysis
This question tests the known limits of paired sales analysis. The method can measure any element of comparison in theory, but it needs well-matched pairs, which are often hard to find. An adjustment from a single pair may not be valid.
Background Knowledge
Paired sales analysis compares sales that are alike except for one element to measure that element's effect. Its strength is directness, but true matches are scarce, and other differences can creep in. Appraisers often support paired results with additional pairs or other techniques.
Real-World Application
An appraiser valuing a house looks for pairs to measure a garage difference but finds only one usable pair. The appraiser supplements it with other market evidence before settling on an adjustment.
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?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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