What research typically lies behind each comparable sale that an appraiser finally selects?
Correct Answer
A) Several sales are often researched and investigated for each one selected
It is often necessary to research and investigate several sales for each comparable sale that is finally selected, since the appraiser seeks sales that require as few adjustments as possible.
Why This Is the Correct Answer
Option A is correct because it is often necessary to research and investigate several sales for each comparable that is finally selected. The appraiser is looking for sales that are most similar to the subject and require as few adjustments as possible, which requires screening a wider pool.
Why the Other Options Are Wrong
Option B: The first sale found in the data source is used without further checks
Option B says the first sale found in the data source is used without further checks. Comparable selection requires verification and comparison against other candidates, so taking the first sale found without checking it skips the necessary research.
Option C: The client supplies the comparables, and the appraiser confirms the price
Option C says the client supplies the comparables and the appraiser only confirms the price. Selecting comparables is the appraiser's own analytical responsibility, and the appraiser researches and investigates sales rather than adopting a client's list.
Option D: Comparables are drawn by lot from the sales recorded in the past year
Option D says comparables are drawn by lot from sales recorded in the past year. Random selection ignores similarity to the subject; appraisers deliberately choose the sales most comparable to the subject after investigating several candidates.
Many searched, few selected
Think of comparable selection like a funnel: many sales go in the top, and only the best few come out the bottom.
How to use: Use this image when a question asks how comparables are chosen.
Exam Tip
Answers that describe shortcuts, random selection or handing selection to the client are usually inconsistent with the appraiser's duty to research and select comparables.
Common Mistakes to Avoid
- -Assuming the closest sale geographically must be used
- -Using sales without verifying the transaction details
- -Treating a client-supplied list as a substitute for the appraiser's own research
Concept Deep Dive
Analysis
This question tests understanding of the research effort behind comparable selection. Appraisers screen and investigate a pool of sales to find those requiring the fewest and smallest adjustments, so many more sales are examined than are finally used.
Background Knowledge
In the sales comparison approach, the reliability of the value indication depends on how similar the comparables are to the subject. Appraisers search data sources, screen candidate sales, verify transaction details and then select those that need the fewest and smallest adjustments.
Real-World Application
An appraiser valuing a suburban ranch home pulls a dozen recent sales from the MLS and public records, verifies several of them, and eliminates those with unusual terms or very different features. Only three or four of the most similar sales end up in the grid.
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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