Why is a foreclosure sale generally a poor comparable in a stable market?
Correct Answer
C) The seller was compelled, so the price reflects duress
Why this is correct: Market value assumes a willing seller not under duress. A foreclosure sale involves a compelled seller (the lender or borrower), so the price reflects distress and does not represent a typical market transaction in a stable market. Why the other choices are wrong: 'Foreclosure prices are not public record' is incorrect because foreclosure sales are typically recorded and become public record. 'Lenders refuse to confirm the sale details' is false; lenders or trustees often provide sale details. 'Foreclosed homes are always in unrepairably poor condition' is an overstatement; condition varies, and the core issue is duress, not necessarily condition. Exam tip: In a stable market, avoid using foreclosure sales as comparables because the seller is under duress, violating the 'willing seller' premise of market value.
Why This Is the Correct Answer
Why this is correct: Market value assumes a willing seller not under duress. A foreclosure sale involves a compelled seller (the lender or borrower), so the price reflects distress and does not represent a typical market transaction in a stable market. Why the other choices are wrong: 'Foreclosure prices are not public record' is incorrect because foreclosure sales are typically recorded and become public record. 'Lenders refuse to confirm the sale details' is false; lenders or trustees often provide sale details. 'Foreclosed homes are always in unrepairably poor condition' is an overstatement; condition varies, and the core issue is duress, not necessarily condition. Exam tip: In a stable market, avoid using foreclosure sales as comparables because the seller is under duress, violating the 'willing seller' premise of market value.
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