A commercial property analysis shows three recent sales: $2.1M, $2.3M, and $1.9M for similar properties. However, the $1.9M sale was a distressed sale due to foreclosure. For valuation purposes, how should this data be treated?
Correct Answer
C) Exclude the distressed sale and focus on the $2.1M and $2.3M sales
Distressed sales typically don't represent fair market value conditions and should generally be excluded from valuation analysis. The $2.1M and $2.3M sales better represent arm's length transactions between willing buyers and sellers under normal market conditions.
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Previous Question
A commercial property analysis shows three different value indications: $2,400,000 (income approach), $2,200,000 (comparison approach), and $2,600,000 (cost approach). Given that this is a 15-year-old office building in an active rental market, which approach should receive the greatest weight in the final value conclusion?
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A commercial property appraisal using the income approach shows a significant variance from the cost approach value. The building is 15 years old and well-maintained. What is the most likely explanation for this variance?