After completing an initial analysis, a valuer discovers that one comparable sale was between related parties at a below-market price. What is the most appropriate course of action?
Correct Answer
C) Exclude the sale and find arm's length comparables to replace it
API standards require that comparable sales represent arm's length transactions between unrelated parties. Sales between related parties at non-market prices should be excluded as they don't reflect true market value, and alternative arm's length comparables should be sourced to ensure valuation accuracy and professional standards compliance.
Why This Is the Correct Answer
Market value assumes an arm's length sale between unrelated, willing parties. A related-party sale at a below-market price does not meet that test, so it should be set aside and replaced with genuine arm's length comparables.
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