Which is sound when selecting market-value comparables?
Correct Answer
C) Verify whether transaction terms, exposure and motivations reflect relevant market behavior.
Verified typical exposure, terms and motivations help assess transaction relevance, but an arm’s-length label does not guarantee price equals market value. No universal one-mile or six-month cutoff or exact-area match controls every assignment; analyze the actual market evidence.
Why This Is the Correct Answer
Option C is correct because a threshold consideration in comparability is whether the sale reflects the conditions of a market value transaction. Verifying transaction terms, market exposure and the parties' motivations shows whether the sale reflects relevant market behavior. Even then, an arm's-length label does not by itself prove the price equals market value.
Why the Other Options Are Wrong
Option A: Apply a one-mile search boundary, as used in most suburban markets.
Option A is wrong because a one-mile search boundary is not a universal standard for suburban markets. The appropriate search area depends on where competing properties and buyers actually are.
Option B: Require identical living area for each comparable, within one square foot of the subject.
Option B is wrong because requiring living area within one square foot of the subject is unrealistic and is not a rule of comparable selection. Size differences can be analyzed and adjusted when supported by the market.
Option D: Apply a six-month cutoff to sales, even when older evidence is better.
Option D is wrong because it applies a six-month cutoff even when older evidence is better. No universal date cutoff controls every assignment; older sales can be the best evidence when properly analyzed for market-condition changes.
Verify the deal, not the ruler
Good comparables come from verified market behavior, not from fixed distance, date or size cutoffs.
How to use: Use this to eliminate answers that rely on rigid numeric limits in comparable selection.
Exam Tip
Answers that impose a fixed radius, fixed age or exact match as a universal rule are usually distractors; prefer the answer focused on verifying market conditions of the sale.
Common Mistakes to Avoid
- -Rejecting better older sales because of a self-imposed six-month cutoff
- -Using a fixed one-mile radius regardless of the market area
- -Assuming an arm's-length sale price automatically equals market value
Concept Deep Dive
Analysis
This question tests sound comparable selection for a market value assignment. The core issue is whether each sale meets the conditions of a market value transaction, which requires verifying terms, exposure and motivations. Fixed search radii, rigid date cutoffs and exact-size requirements are not substitutes for analyzing the actual market evidence.
Background Knowledge
Comparable sales should represent transactions between typically motivated parties with adequate exposure and market terms. Appraisers verify sales with parties to the transaction or other reliable sources. Selection criteria such as distance, date and size are guides that follow the market evidence, not fixed rules.
Real-World Application
In a rural area with few sales, an appraiser uses a sale from eight months ago two miles away because it is the most similar competing property. Before relying on it, the appraiser confirms with the listing agent that it had normal exposure, conventional financing and no unusual motivation. The appraiser then adjusts for market-condition changes based on supported evidence.
More Sales Comparison Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
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