What is one rule of thumb about the number of adjustments and comparability, and what is considered a better indicator?
Correct Answer
B) More adjustments mean less comparability; gross adjustment is better
One rule of thumb is that the more adjustments a sale needs, the less comparable it is; the absolute gross adjustment, which weights each difference by its market-derived amount, is perhaps a better indicator.
Why This Is the Correct Answer
Option B is correct because one rule of thumb is that the greater the number of adjustments, the less comparable the sale. The absolute gross adjustment is perhaps a better indicator of comparability. Adding adjustments without regard to sign shows the total amount of difference the appraiser had to account for.
Why the Other Options Are Wrong
Option A: More adjustments mean a better comparable; net adjustment is better
Option A says more adjustments mean a better comparable and that net adjustment is better. Both parts are reversed: more adjustments suggest less comparability, and net adjustment can hide large offsetting differences, so gross adjustment is the better indicator.
Option C: The number of adjustments does not matter; sale price is better
Option C says the number of adjustments does not matter and that sale price is better. The rule of thumb is that more adjustments mean less comparability, and the sale price alone does not measure how similar the property is to the subject.
Option D: Fewer adjustments mean a worse comparable; the median is better
Option D says fewer adjustments mean a worse comparable and that the median is better. Fewer adjustments suggest a more comparable sale, and the median is not the stated indicator; absolute gross adjustment is.
Gross shows the gap
Net can cancel out; gross adds the size of each adjustment, so it better shows how different a sale really is.
How to use: Use this when comparing the reliability of adjusted comparables.
Exam Tip
Remember that a near-zero net adjustment does not by itself mean a sale is highly comparable.
Common Mistakes to Avoid
- -Judging comparability by net adjustment alone
- -Believing more adjustments make a better comparable
Concept Deep Dive
Analysis
This question tests how comparability is judged from adjustments. One rule of thumb says the more adjustments a sale needs, the less comparable it is. The absolute gross adjustment is perhaps a better indicator because it reflects the size of each adjustment, not just the count.
Background Knowledge
Net adjustment is the sum of adjustments with signs, so positive and negative adjustments can offset. Gross adjustment adds the absolute values, showing the total magnitude of differences. A sale with a small net but large gross adjustment may be less comparable than it appears.
Real-World Application
Two comparables both show a net adjustment of about $2,000. One has a gross adjustment of $4,000 and the other $60,000 from large offsetting adjustments, so the appraiser gives more weight to the first.
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
Which data set is a primary way to estimate a market conditions (time) adjustment?
Next Question
Recorded comparable price is $275,000. Market evidence expressly attributes $6,000 of that price to financing concessions, not merely the concession’s seller cost. Remove that verified price effect first, then apply a supported total 3% time increase to the cash-equivalent balance. What result follows?