Why can the sales comparison approach be hard to apply to special-purpose properties such as a ski resort?
Correct Answer
D) Because comparable sales data are often lacking
It may be difficult to apply the comparative sales approach to special-purpose properties because of the frequent lack of comparable sales data.
Why This Is the Correct Answer
Option D is correct because the sales comparison approach depends on comparable sales, and special-purpose properties such as a ski resort frequently lack comparable sales data. Without enough similar transactions, it is difficult to develop a credible indication by comparison.
Why the Other Options Are Wrong
Option A: Because special-purpose properties cannot be legally sold
Option A says special-purpose properties cannot be legally sold. They can be sold; the difficulty is that sales of truly similar properties are infrequent.
Option B: Because their prices are set by state regulation
Option B claims their prices are set by state regulation. Prices for properties such as ski resorts are not set by regulation; the problem is the scarcity of comparable sales.
Option C: Because lenders do not finance special-purpose property
Option C states that lenders do not finance special-purpose property. Financing availability is not the reason the approach is hard to apply; the issue is the frequent lack of comparable sales data.
Rare property, rare comps
The more unusual the property, the fewer sales there are to compare it with. Few comps means a weaker sales comparison approach.
How to use: Use this when a question asks why sales comparison struggles for unique properties.
Exam Tip
When a question asks about limits of the sales comparison approach, focus on availability of comparable sales data.
Common Mistakes to Avoid
- -Assuming special-purpose properties cannot be sold
- -Blaming financing rather than data scarcity
- -Treating sales comparison as equally reliable for all property types
Concept Deep Dive
Analysis
This question tests a basic limitation of the sales comparison approach. The approach relies on sales of similar properties, so it is weakest where such sales are scarce. Special-purpose properties like ski resorts sell infrequently and differ widely from one another.
Background Knowledge
Special-purpose properties are designed for a specific use and often have a limited market. Because few similar properties sell, appraisers may rely more on the cost approach or other methods. The reliability of sales comparison rises and falls with the quantity and quality of comparable data.
Real-World Application
An appraiser is asked to value a regional ski resort and finds only a handful of resort sales nationwide in recent years, each with very different terrain and facilities. The appraiser gives the sales comparison approach less weight and develops other approaches to support the conclusion.
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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