A property sold for $800,000 but had a non-typical financing arrangement with a below-market interest rate. How should this be treated in a CMA?
Correct Answer
C) Adjust the sale price downward to reflect market financing terms
Sales with non-typical financing terms must be adjusted to reflect what the property would have sold for under normal market financing conditions. Below-market financing artificially inflates the sale price, so a downward adjustment is necessary for accurate comparison.
Why This Is the Correct Answer
When a property sells with below-market financing, the buyer effectively pays more than they would under normal market conditions because they benefit from the favorable loan terms. To ensure accurate comparison in a CMA, the sale price must be adjusted downward to reflect what the property would have sold for with typical market financing. This adjustment removes the artificial price inflation caused by the non-typical financing arrangement, providing a true market value comparison.
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A property sold for $450,000 and generates annual net operating income of $27,000. What is the capitalization rate?
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A real estate agent is preparing a CMA for a 2,000 square foot bungalow. A comparable property sold for $450,000 but has an additional 300 square feet. If the adjustment is $150 per square foot, what is the adjusted sale price of the comparable?