Which suggested sequence of adjustments is consistent with standard sales comparison practice?
Correct Answer
B) Property rights, financing, market conditions, then location and physical
Transaction elements are adjusted first, in order: property rights conveyed, financing terms (cash equivalence), conditions of sale and expenditures made immediately after purchase; market conditions is next, and property characteristics such as location and physical features come last. Market conditions is applied to a price already normalized for the transaction elements.
Why This Is the Correct Answer
Option B is correct because the suggested sequence begins with property rights conveyed and cash equivalence (financing), followed by market conditions, and ends with location and physical characteristics. The market-conditions adjustment is applied to a price already normalized for the transaction elements. Option B lists those elements in that order.
Why the Other Options Are Wrong
Option A: Location, physical characteristics, market conditions, then property rights
Option A starts with location and physical characteristics and ends with property rights. That reverses the suggested sequence, where property rights come first and location and physical features come last.
Option C: Market conditions, location, financing, then property rights conveyed
Option C starts with market conditions and places financing and property rights after location. In the suggested sequence, property rights and financing precede market conditions, and location comes after them.
Option D: Physical characteristics, property rights, location, then market conditions
Option D begins with physical characteristics and ends with market conditions. The suggested sequence puts physical characteristics last and market conditions before location and physical features.
Deal first, then date, then dirt
Adjust the deal (rights and financing), then the date (market conditions), then the dirt and building (location and physical).
How to use: Use this to check the order of adjustments on a grid or in an exam question.
Exam Tip
Look for the option that starts with property rights and financing and ends with location and physical features.
Common Mistakes to Avoid
- -Making physical adjustments before transaction adjustments
- -Applying market conditions before financing is normalized
- -Treating a suggested sequence as a USPAP requirement
Concept Deep Dive
Analysis
This question tests the suggested order of adjustments in the sales comparison approach. Transaction elements such as property rights and financing come first, then market conditions, and property characteristics such as location and physical features come last. Find the option that follows that order.
Background Knowledge
A suggested sequence is: property rights and interests conveyed, cash equivalence (financing), non-real property items, market conditions, highest and best use and legal restrictions, and finally location and physical and economic characteristics. Transaction adjustments come first so later adjustments start from a normalized price. This is a suggested practice, not a sequence prescribed by USPAP.
Real-World Application
A comparable sold as a leased fee with seller financing a year ago. The appraiser first adjusts for the property rights and financing, then applies the market-conditions adjustment, and only then adjusts for location and physical differences.
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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