Why is a sale between family members normally excluded from a statistical study of market behaviour?
Correct Answer
B) The price may not reflect open market terms
Why this is correct: A sale between family members is normally excluded because the price may not reflect open market terms. Such transactions may involve non-market considerations like gifts or special financing, violating the arm's-length assumption required for market value analysis. Why the other choices are wrong: Such transactions are usually legally recorded. They do not always close below market value; they may be above or below. The parties often can be contacted, but the terms are still non-market. Exam tip: When building a comparable sales dataset, exclude non-arm's-length transactions (family sales, foreclosures, short sales unless typical) to reflect true market behavior.
Why This Is the Correct Answer
Why this is correct: A sale between family members is normally excluded because the price may not reflect open market terms. Such transactions may involve non-market considerations like gifts or special financing, violating the arm's-length assumption required for market value analysis. Why the other choices are wrong: Such transactions are usually legally recorded. They do not always close below market value; they may be above or below. The parties often can be contacted, but the terms are still non-market. Exam tip: When building a comparable sales dataset, exclude non-arm's-length transactions (family sales, foreclosures, short sales unless typical) to reflect true market behavior.
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Previous Question
Eight sales closed at $200,000, $220,000, $220,000, $220,000, $230,000, $230,000, $250,000 and $270,000. The mean is $230,000. What is the population standard deviation?
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An appraiser selects the comparables that best match the subject rather than drawing sales at random. What follows?