An appraiser identifies a comparable sale in which the seller paid $15,000 toward the buyer's closing costs. Under USPAP and California appraisal practice, how should this seller-paid concession be treated when using this comparable in the sales comparison approach?
Correct Answer
C) Reduce the comparable's effective sale price by $15,000 to reflect the true market value exchange
Under USPAP Advisory Opinion 11 and standard California appraisal practice, seller-paid concessions inflate the recorded sale price relative to the true market value exchanged. When a seller contributes $15,000 toward closing costs, the buyer's net cost is effectively $15,000 less than the recorded price. To reflect the true arm's-length value, the appraiser must reduce the comparable's effective sale price by the concession amount, producing an adjusted price that represents what a buyer would have paid without the concession.
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Previous Question
In California, a real estate agent prepares a CMA for a home in a community that has both a Mello-Roos special tax and a Landscape and Lighting Assessment District (LLAD) levy. A potential buyer asks the agent to explain how these assessments differ from the standard Proposition 13 property tax. Which statement is MOST accurate?
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An appraiser using the sales comparison approach identifies a comparable that sold for $920,000 as part of a 1031 exchange under IRC §1031. The buyer was an exchanger operating under the 45-day identification deadline and had limited replacement property options remaining. How should the appraiser treat this comparable?