Which comparable usually deserves the most weight in reconciling the sales comparison approach?
Correct Answer
A) The sale needing the smallest gross adjustment as a share of price
The sale requiring the least significant absolute gross adjustment, measured as a percentage of price, is often the most comparable and should be given the most weight. Price, number of adjustments or recency alone do not decide.
Why This Is the Correct Answer
Option A is correct because the sale requiring the least significant absolute gross adjustment, measured as a percentage of sale price, is often the most comparable sale. That sale usually deserves the most weight, since fewer and smaller adjustments mean less room for adjustment error.
Why the Other Options Are Wrong
Option B: The sale with the highest adjusted price in the grid
Option B is wrong because it favors the sale with the highest adjusted price in the grid. A high adjusted price says nothing about how similar the sale is to the subject.
Option C: The sale with the greatest number of line-item adjustments
Option C is wrong because it favors the sale with the greatest number of line-item adjustments. More adjustments generally indicate less similarity, which points toward less weight, not more.
Option D: The sale that closed most recently, before weighing adjustments
Option D is wrong because it favors the most recent sale before considering adjustments. Recency matters, but it is only one element; the overall size of the adjustments is a better guide to comparability.
Least adjusted, most trusted
The comparable that needed the least total adjustment, as a share of price, is often the best match to the subject.
How to use: Use this when a question asks which comparable to weight most in reconciliation.
Exam Tip
Gross adjustment percentage is a more useful guide to comparability than net adjustment, price level or the count of lines, but weigh it together with the support behind each adjustment.
Common Mistakes to Avoid
- -Weighting the sale with the smallest net adjustment when gross adjustments are large
- -Favoring the most recent sale without regard to adjustments
- -Treating a higher adjusted price as more reliable
Concept Deep Dive
Analysis
This question tests a common guide to weighting comparables in reconciliation. The sale that needs the least gross adjustment, measured as a percentage of its price, is often the most comparable. Price level, number of adjustment lines and recency alone do not decide which sale is most similar.
Background Knowledge
Gross adjustment adds up all adjustments regardless of sign, showing how different a comparable is from the subject. Net adjustment can look small when large positive and negative adjustments cancel, so gross adjustment as a percentage of price is a more useful measure of similarity.
Real-World Application
An appraiser's four comparables have gross adjustments of 6%, 12%, 15% and 20% of sale price. She places the most weight on the 6% sale and explains in the report that it was the most similar to the subject.
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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