Which of these is a recognized quantitative technique for estimating adjustment amounts?
Correct Answer
D) Capitalization of rent difference
AH 502 lists paired sales analysis, capitalization of rent difference (gain or loss), statistical analysis, discounting and time value of money concepts, and cost analysis as recognized techniques.
Why This Is the Correct Answer
Option D is correct because capitalization of rent difference (gain or loss) is listed among the recognized techniques for estimating adjustments. It converts the difference in rent attributable to a feature into a value difference. This ties the adjustment to market income evidence.
Why the Other Options Are Wrong
Option A: The assessor’s land-to-building ratio
Option A, the assessor's land-to-building ratio, is not among the recognized techniques for estimating adjustment amounts. It does not measure how the market prices a specific difference between properties.
Option B: The listing agent’s opinion of value
Option B, the listing agent's opinion of value, is an opinion, not a quantitative technique for deriving adjustments from market data.
Option C: The buyer’s stated reason for purchase
Option C, the buyer's stated reason for purchase, may help understand a sale's conditions but is not a quantitative technique for estimating adjustment amounts.
Pairs, Rent, Stats, Time, Cost
The five recognized techniques: paired sales, capitalized rent difference, statistical analysis, discounting and time value of money, and cost analysis.
How to use: Use this list to spot the recognized technique among distractors.
Exam Tip
Pick the option that is a measurement method; opinions and motives are not quantitative techniques.
Common Mistakes to Avoid
- -Treating an agent's opinion as adjustment support
- -Confusing assessment ratios with market-derived adjustments
Concept Deep Dive
Analysis
This question tests recognition of accepted quantitative techniques for estimating adjustment amounts. The recognized list includes paired sales analysis, capitalization of rent difference, statistical analysis, discounting and time value of money concepts, and cost analysis. The distractors are opinions, motives or ratios that do not measure a market adjustment.
Background Knowledge
Adjustment amounts should be derived from market evidence using accepted techniques. Paired sales analysis, capitalization of rent difference, statistical analysis, discounting and time value of money concepts, and cost analysis are recognized methods. Each produces an adjustment that can be explained and supported.
Real-World Application
An appraiser finds that apartments with in-unit laundry rent for more per month than similar units without it. The appraiser capitalizes that rent difference with a market-supported rate to estimate the laundry adjustment.
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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Previous Question
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?
Next Question
An appraiser plans to measure the adjustment for a fenced in-ground pool by capitalizing a rent difference, because many homes in the neighborhood are rented and no paired sales isolate a pool. Which two inputs does this technique require?