Sales differing in quality also have unresolved size, condition and design differences. What limits an isolated paired quality indication?
Correct Answer
D) The price difference is confounded by other uncontrolled influences.
If quality differences are bundled with other characteristics and cannot be credibly controlled, the observed price gap does not isolate quality alone. A quality adjustment remains possible with appropriate evidence; neither visibility nor a categorical standards prohibition prevents it.
Why This Is the Correct Answer
Option D is correct because paired sales analysis studies nearly identical properties to determine a single characteristic's effect on value. When size, condition and design differences remain unresolved, the price difference is confounded by those other influences, so it does not isolate the effect of quality.
Why the Other Options Are Wrong
Option A: Buyers cannot see construction quality, so it has no price effect.
Option A says buyers cannot see construction quality, so it has no price effect. Buyers do recognize and pay for differences in quality, and quality adjustments are routinely made when supported by evidence.
Option B: Quality cannot be described or rated in appraisal reports.
Option B says quality cannot be described or rated in appraisal reports. Appraisers do describe and rate construction quality in reports, so this is not the limitation.
Option C: Standards prohibit construction-quality adjustments in paired analysis.
Option C says standards prohibit construction-quality adjustments in paired analysis. No such categorical prohibition exists; a quality adjustment is possible with appropriate evidence, and the problem here is the uncontrolled differences in the pair.
One Difference, One Answer
A pair can answer a question about one feature only when that feature is the one real difference between the sales.
How to use: Use this to judge whether a paired sale truly isolates the feature the question asks about.
Exam Tip
When a pair differs in several ways, look for the answer about confounding influences rather than a claim that the feature has no value or is forbidden.
Common Mistakes to Avoid
- -Crediting the entire price difference of a mixed pair to one feature
- -Assuming quality has no measurable price effect
- -Believing standards forbid quality adjustments
Concept Deep Dive
Analysis
This question tests the logic behind paired sales analysis. A pair isolates a single characteristic only when the properties are nearly identical in other respects. If the sales also differ in size, condition and design, the price gap mixes several influences and cannot be credited to quality alone.
Background Knowledge
Paired sales analysis, or paired data analysis, compares nearly identical properties so that the price difference can be attributed to one characteristic. The more uncontrolled differences there are, the less reliable the isolated indication becomes, and other corroborating evidence is needed.
Real-World Application
An appraiser tries to measure a quality adjustment from two sales, but the higher-quality home is also larger and recently renovated. Recognizing the price gap reflects several factors, the appraiser looks for cleaner pairs or other supporting analysis.
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
The absolute GLA difference is 210 sf and a supported marginal rate is $65/sf. What is the adjustment MAGNITUDE, without a sign? Direction would additionally require knowing which property is larger.
Next Question
A 1,980-sf ranch house in a neighborhood where prices have been stable is being appraised by relative comparison. Four recent sales of the same builder's floor plan are each rated similar to the subject overall. Sale 1 sold for $421,000, Sale 2 for $424,000 and Sale 3 for $426,000. Sale 4, which closed two weeks ago and is the most recent, sold for $468,000. What should the appraiser do with Sale 4?