What makes a sample of sales representative of its market?
Correct Answer
D) It reflects the mix of properties in that market
Why this is correct: A representative sample mirrors the population's key characteristics. For a market, this means the sample should reflect the actual mix of property types, ages, sizes, locations, and conditions present, allowing valid inferences about the whole market. Why the other choices are wrong: 'It contains at least thirty separate transactions' is wrong; a specific count does not guarantee representativeness. 'It draws only from the most recent three months' is incorrect; recency alone does not ensure the sample matches market composition. 'It excludes every sale needing an adjustment' is false; excluding all adjusted sales would bias the sample and likely make it unrepresentative. Exam tip: Focus on composition over count. A small, well-stratified sample is better than a large, biased one.
Why This Is the Correct Answer
Why this is correct: A representative sample mirrors the population's key characteristics. For a market, this means the sample should reflect the actual mix of property types, ages, sizes, locations, and conditions present, allowing valid inferences about the whole market. Why the other choices are wrong: 'It contains at least thirty separate transactions' is wrong; a specific count does not guarantee representativeness. 'It draws only from the most recent three months' is incorrect; recency alone does not ensure the sample matches market composition. 'It excludes every sale needing an adjustment' is false; excluding all adjusted sales would bias the sample and likely make it unrepresentative. Exam tip: Focus on composition over count. A small, well-stratified sample is better than a large, biased one.
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An appraiser develops a multiple regression model to estimate residential sale price using GLA, age, number of bathrooms, and distance to nearest highway. The model yields an adjusted R² of 0.72 and a standard error of the estimate of $24,500. Which statement best reflects the appropriate interpretation of the standard error of the estimate in this context?