Why is a resale of the same property the strongest evidence of a market conditions trend?
Correct Answer
B) Physical and locational variables are held constant
Why this is correct: A resale of the same property (assuming no significant physical changes) holds physical and locational characteristics constant. Therefore, any price change between the two sale dates can more confidently be attributed to market conditions (time) rather than differences in the property itself. Why the other choices are wrong: The choice that resales close faster is incorrect; transaction speed is not the key factor. The choice that resale prices are always recorded more accurately is wrong; recording accuracy is not guaranteed. The choice that lenders require resale data is false; while useful, it's not a universal lender requirement. Exam tip: For isolating time adjustments, a resale is the best 'paired sale' because the property is its own control.
Why This Is the Correct Answer
Why this is correct: A resale of the same property (assuming no significant physical changes) holds physical and locational characteristics constant. Therefore, any price change between the two sale dates can more confidently be attributed to market conditions (time) rather than differences in the property itself. Why the other choices are wrong: The choice that resales close faster is incorrect; transaction speed is not the key factor. The choice that resale prices are always recorded more accurately is wrong; recording accuracy is not guaranteed. The choice that lenders require resale data is false; while useful, it's not a universal lender requirement. Exam tip: For isolating time adjustments, a resale is the best 'paired sale' because the property is its own control.
More appraisal-statistical-methods Questions
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An appraiser runs a regression of sale price on GLA, age, and a binary variable for 'renovated' (1 = yes, 0 = no). The estimated coefficient for 'renovated' is $18,400 with a standard error of $6,200 and a t-statistic of 2.97. Assuming a two-tailed test at Ξ± = 0.05 and 42 degrees of freedom, what conclusion is supported regarding the market's recognition of renovations?
To validate the functional form of a regression model used for adjustments, an appraiser plots residuals against predicted values and observes a clear inverted-U pattern. What does this pattern indicate, and what is the most defensible corrective action?
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