Which adjustment technique does not require the strict similarity between sales that paired sales analysis does, if an adequate database is available?
Correct Answer
D) Multiple regression analysis
With an adequate database, multiple regression is a valid technique for estimating the contribution of selected elements that does not require the strict similarity between parcels that most other methods need. Rules of thumb are not market derived.
Why This Is the Correct Answer
Option D is correct because, if an adequate database of sales is available, multiple regression analysis is a valid technique for estimating the contributory value of selected elements. It does not require the strict similarity between parcels that most other methods need. It handles several differences together by modeling them across many sales.
Why the Other Options Are Wrong
Option A: Cost analysis based on contractor bids
Option A, cost analysis based on contractor bids, is wrong because it measures what a feature costs to build, not the market's reaction across dissimilar sales. It is not the technique described as removing the strict-similarity requirement.
Option B: Capitalization of a rent difference
Option B, capitalization of a rent difference, is wrong because it converts an income difference into a value difference and still depends on comparable rental data. It is not the technique identified as working without strict similarity among sales.
Option C: Lump-sum adjustment by rule of thumb
Option C, a lump-sum adjustment by rule of thumb, is wrong because rules of thumb are not market derived. They do not provide a valid market-based estimate of contribution at all.
Many sales, many variables
Regression trades strict similarity for a large database, letting many sales and many variables do the isolating.
How to use: Use this when asked which technique works without nearly identical sales.
Exam Tip
Link 'adequate database' with regression; link 'nearly identical properties' with paired sales.
Common Mistakes to Avoid
- -Thinking regression needs nearly identical sales like paired sales
- -Treating rules of thumb as market-derived support
- -Confusing cost to build with market contribution
Concept Deep Dive
Analysis
This question tests which adjustment technique can work without nearly identical sales. Paired sales analysis needs sales that differ in only one characteristic. Multiple regression, given an adequate database, can estimate several feature contributions at once without that strict similarity.
Background Knowledge
Common techniques for deriving adjustments include paired sales analysis, statistical analysis such as regression, cost analysis and capitalization of income differences. Paired sales need sales that are alike except for the feature studied. Regression uses a large set of sales to estimate the contribution of several features at once.
Real-World Application
In a large tract-home market, an appraiser cannot find pairs that differ by only one feature. With hundreds of recent sales available, the appraiser runs a regression that estimates GLA, garage and age contributions together. The results support adjustments that paired sales could not isolate.
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
When does market evidence support expressing a comparable adjustment as a percentage rather than a fixed dollar amount?
Next Question
The subject property is a 1,720-sf two-story home in an established subdivision. The appraiser ranks four recent sales against it overall. Sale 1, which sold for $331,000, is inferior; its price and date come only from the public record, and neither the parties nor the agents could be reached. Sale 2 ($344,000), Sale 3 ($349,000) and Sale 4 ($357,000) are superior, and each was confirmed with the listing agent. Sale 4's assessed value is $296,000. The appraiser concludes that the sales bracket the subject between $331,000 and $344,000. What is the main weakness of this bracket?