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?
Correct Answer
B) Make a potential downward adjustment to account for the buyer's time pressure, which may have caused the exchanger to pay above market value
Under IRC §1031, an exchanger must identify replacement property within 45 days of closing the relinquished property and complete the exchange within 180 days. When an exchanger is near the end of the 45-day identification window with few viable options, time pressure can motivate above-market offers to secure a qualifying property. USPAP Standards Rule 1-2(e) requires the appraiser to analyze conditions of sale that may affect price. If evidence suggests the exchanger's urgency influenced the $920,000 price, a downward adjustment may be warranted to reflect what an unencumbered buyer would have paid.
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Previous Question
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?
Next Question
A California listing agent is preparing a CMA for a property in a neighborhood where the local city recently enacted a vacancy tax on vacant residential properties. Two comparables are available: one was occupied at the time of sale and one had been vacant for over a year and subject to the vacancy tax. How should the agent handle this difference in the CMA?