Progress Exam 4 Sales Comparison Approach
Appraiser Arnold is researching trends in his market. He notes that property values have been declining over the last 6 months because a major employer filed bankruptcy. The mean sales price 6 months ago was $150,000 for a 1,200-squaree-foot ranch. Currently the mean sales price is $140,000. What is the monthly percentage decline in value in Arnold's market?
$10,000/$150,000 = 6.67%/6 months = 1.1%
Use the following sales prices of 11 houses to answer the question. $67,300 $73,000 $102,000 $102,000 $102,000 $104,000 $104,000 $110,000 $112,500 $116,000 $220,600 The mode of all the sales is:
$102,000
Use the following sales prices of 11 houses to answer the question. $67,300; $73,000; $102,000; $102,000; $102,000; $104,000; $104,000; $110,000; $112,500; $116,000; $220,600. The median of these 11 sales is:
$104,000
An appraiser is trying to extract a GLA adjustment from market data. She has two sales: Columbus Street has 1,375 square feet and sold for $360,000. Petunia Lane sold for $375,000 and has 1,514 square feet. What is the appropriate GLA adjustment per square foot?
$107.91
An appraiser is using six sales in the sales comparison approach. The adjusted sales prices are: $105,000; $125,000; $105,000; $95,000; $119,000; and $99,000. To better reconcile these data the appraiser is calculating the mean, median, and mode of this sample. The mean, median, and mode are
$108,000; $105,000; $105,000
The subject property is 2,400 square feet and is located in a market that generally values differences in gross living area at $45 per square foot. What would the adjustment be to a comparable with 2,150 square feet?
$11,250 upward
Use the following sales prices of 11 houses to answer the question: $67,300 $73,000 $102,000 $102,000 $102,000 $104,000 $104,000 $110,000 $112,500 $116,000 $220,600 The mean of all the sales is:
$110,309
A 2,100 sf parcel sold for $104/sf; a 1,500 sf parcel sold for $112/sf; and a 1,800 sf parcel sold for $108/sf. Using extrapolation, the anticipated unit of comparison for a 1,200 sf parcel is
$116/sf
Aaron is appraising a house on the waterfront where some houses have private boat docks. The subject is 2,913 square feet, 3 bed 2 bath, 2-car garage, and boasts a waterfront location with a boat dock. The market-based adjustment for living area is $60 per square foot, a 3-car garage space is valued at $6,000, and the private dock is valued at $150,000. The waterfront amenity is worth about $200,000. One of the comps Aaron has selected is: Comparable 3, which recently sold for $1,590,000, is a 2,711 square feet, 4 bed 2.5 bath, 2-car garage, water frontage, and a boat dock. The house was once configured as a 3-bedroom, but the floor plan was redesigned 12 years ago after some minor fire damage. What is the GLA adjustment that should be made to Comparable 3?
$12,120
Appraiser Jo has many sales from which to choose for the house appraisal she has accepted. Unfortunately, Jo has no good candidates for a paired sales analysis. Jo wonders, "How will I ever derive individual adjustments for my sales comparison grid?" Jo organizes the sales into clusters: Group A (houses with central air conditioning): n = 21; x = $124,392; Group B (houses without central air conditioning): n = 18; x = $121,462. There are various other differences between Groups A and B, but Jo thinks those differences will offset, and cancel each other out. The subject property lacks central air conditioning. The property Jo is using as Sale One sold for $130,000, and has central air conditioning. What is the adjusted value of Sale One? (round to the nearest thousand)
$124,392 - $121,462 = $2,930, rounded to $3,000. Since Sale One had CAC, and subject did not, a negative adjustment of $3,000 was called for. Therefore, $130,000 - $3,000 = $127,000
A parcel in a lakefront community with no lake view sells for $100,000, while a parcel in the same community with a lake view sells for 25% more. If you appraised a square lot in this community that measures 10,000 square feet and has a view of the lake, what would be the price of the lot on a front foot basis?
$125,000 ($100,000 x 1.25 = $125,000). So $125,000/ 100 = $1,250.
An appraiser selects a comparable property that sold one year ago for $125,000. Today, this comparable is worth 10 percent more than the subject property. Property values in the market area have appreciated 5 percent annually. What is the indicated value of the subject property?
$125,000 x 1.05 = $131,250. $131,250 / 1.10 = $119,318,
Appraiser Tom notes that one of his comparable sales had a seller pay 2 discount points for the buyer. If the sale price was $130,000 one year ago, and the market has appreciated 5% per year, what is the adjusted sale price of the comparable property? The LTV reported for the sale was 80%. Assume that seller-paid points have full contributory value in the subject market. Round to the nearest hundred.
$130,000 x 80% = $104,000 x .02 = $2,080. Since it is a seller concession, the price is adjusted downward, making the cash equivalent sales price $127,920. The market condition analysis is then undertaken: $127,920 x 1.05 = $134,316 rounded to $134,300.
You are appraising a property in order to establish its listing price and have found an identical comparable to use in your appraisal. The comparable sold six months ago for $134,000. You must make an adjustment for the difference in time between the two sales. You find a paired sale of two other houses, one of which sold one year ago for $100,000 and the other sold yesterday for $110,000. What is the adjusted value for the comparable?
$140,700
Sally Appraiser is appraising the fee simple estate of a brick ranch in an urban neighborhood. The intended use is asset valuation for mortgage lending. Through her research she extracts the following adjustment factors: Fireplace: $2,000; Central Air Conditioning: $3,000; Basement: $10,000; Fourth bedroom: $15,000. What is the indicated value range of the subject property?
$145,000 - 160,000
The subject property is a 2,400 square foot, 5-year-old, single-family tract home with a typical view, stucco exterior, 10 rooms, 4 bedrooms, 3 baths, and 3-car garage. The property is in good condition and house prices have been increasing at a compounded rate of 1% a month. What is the market conditions adjustment that should be made to a comparable property that sold 4 months ago for $380,000?
$15,430
refer to question 70
$150,000 x 5% = +$7,500. The adjustment for fireplace is +$5,000. And the adjustment for basement is -$25,000. The net adjustment is -$12,500; the indicated value is $150,000 - $12,500 = $137,500
Appraiser Denice has collected sales data for a residential appraisal she is performing. She has plotted the sales as follows: Click here to open image. Given the relationships of size and price per square foot, what is the anticipated price per square foot of a residence with a size of 2,300 square feet? refer to question 60
$170
A comparable property sold a week ago for $165,000. The property had previously sold for $175,000 six months ago. What is the annual change in market conditions indicated by this sale and re-sale?
$175,000 = -$10,000. -$10,000/$175,000 = .0571 x 2 (to annualize the 6 month rate) = -.1143, or -11.43%.
Appraiser Zeke is appraising a single-unit residence for estate planning purposes. The subject property is located in a federally-designated flood zone that actively floods. In the flood zone there is buyer resistance to properties with a basement. Such properties typically sell for less than similar properties with crawl spaces. Zeke's research indicates that a third bedroom is worth $10,000. The market has been stable for the past 6 months. Basements are deleterious, and have a negative impact of 10% of value/sales price. What is the indicated value of the subject property? Click here to open image. refer to question 57
$198,000
Appraiser Henrietta, who has been a residential appraiser for 30 years, is appraising a four-bedroom condominium unit. She is nearly finished with her appraisal, but has yet to ascertain what a fourth bedroom is worth in her subject market. Two sales, identical in many ways, are used in a paired set analysis: Sale A has 3 bedrooms and rents for $1,500/month. Sale B has 4 bedrooms and rents for $1,700/month. Analysis of other sales in the subject market indicate that investors expect a monthly multiplier of 120 when purchasing rental condos in the subject market. What is the indicated value of a fourth bedroom in the subject market?
$24,000
A $400,000 sale had the following adjustments: fireplace (-$5,000); 4th bedroom (+$25,000); 2nd bathroom (-$10,000). The net adjustment percentage is
$25,000 - $5,000 -$10,000 = $10,000. The percentage is $10,000/$400,000 = .0255, or +2.50%.
See question 24
$25/sf
A comparable has a pool, valued at $25,000, and the subject property does not. The comparable property sold 6 months ago for $250,000. In the past year, the market has appreciated 10%. What is the adjusted sales price of this comparable?
$250,000 x 1.05 (6 months appreciation) - $25,000 = 237,500.
A comparable sold 1 year ago for $300,000. Since then, values have declined 8%. The comparable had creative financing that is recognized in the market and in favor of the buyer by 5%. Time Adjustment: -8% Financing Adjustment: -5% What is the adjusted sales price of this comparable?
$262,200
Suppose a comparable property is 12% inferior to the subject property and sold 2 weeks ago for $260,000. What is the adjusted price of this comparable?
$291,200
Warren is appraising a tract house. The subject is 3-bedroom 2-bath, with a 3-car garage, and 1,671 square feet. Most houses in the subject's market have 2-car garages. Warren determines that a 3-car garage space is worth a premium of $6,000. In this particular development, there are no association dues, but there is a private clubhouse with tennis courts and a pool. Membership is optional and is open only to residents of the subdivision. Adjustments for gross living area for houses between 1,200 square feet and 2,000 square feet are based on a $40 factor. For increments of living area greater than 2,000 square feet, the value per square foot is $30. Warren has a comparable to analyze: Comparable 2, which sold for $300,000, is 1,496 square feet, 3 bed 2 bath, 2-car garage, and the sale included a $2,500 seller concession towards the buyer's closing costs that affected the sale price by the full amount of $2,500. What should Warren calculate as an appropriate adjusted sale price for Comparable 2?
$300,000 sales price - $2,500 closing cost concession + $7,000 for square footage adjustment (1,671 - 1,496 = 175 x $40 factor = $7,000) + $6,000 garage adjustment = $310,500 adjusted sales price.
Mike is appraising a house in a newer subdivision. The subject is a 3-bedroom, 2-bath house with a 3-car garage, and is 1,671 square feet. Most houses have 2-car garages, but a 3-car garage space is worth a premium of $6,000. In this particular development, there are no association dues, but there is a private clubhouse with tennis courts and a pool. Membership is optional and is open only to residents of the subdivision. Adjustments for gross living area for houses between 1,200 square feet and 2,000 square feet are based on a $40 factor. For increments of living area greater than 2,000 square foot, the value per square foot is $30. Mike has a comparable to analyze: Comparable 1, which sold for $330,000, is 1,911 square feet, 3 bed 2 bath, 3-car garage, and the sale terms included the seller-paid concessions of $8,000 which affected the sale price by the full amount of $8,000. What is the appropriate adjusted sale price for Comparable 1?
$312,400
Refer to question 81
$347,000
refer to question 79
$40,000
A comparable sold 1 year ago for $400,000. Since then, values have declined 8%. The comparable had creative financing that is recognized in the market and in favor of the buyer by 5%. Market conditions Adjustment: -8% Financing Adjustment: -5% What is the adjusted sales price of this comparable?
$400,000 x (1 - 0.05) x (1 - 0.08) = $349,600
The indicated (adjusted) values of three sales in a sales comparison approach are: $400,000; $410,000; and $420,000. The appraiser wants to weigh the $400,000 number the most, and assigns it a weight of 5. The $410,000 will be weighted the least at 1, and the $420,000 figure will be weighted at 2. What is the weighted average for the three sales? Round to the nearest thousand.
$400,000 x 5 = $2,000,000. $410,000 x 1 = $410,000. $420,000 x 2 = $820,000. ($2,000,000 + $410,000 + $820,000 = $3,230,000/8 (the weighting factor) = $406,250, rounded to $406,000.
An appraiser is appraising vacant lots in a new subdivision and is trying to extract a lot size adjustment from market data. She has two sales: Shasta Street is 8,125 square feet and sold for $340,000. Superior Lane is 8,687 square feet, on a cul-de-sac, and sold for $390,000. Because Superior Lane is on a cul de sac, it enhances the value by about $25,000. What is the appropriate lot size adjustment per square foot?
$44.48
The subject property is on 1 acre and has a 1-car garage. Use the following information to determine the value of the subject property. Comp 1 - 1 acre 2-car garage $51,000 Comp 2 - 0.5 acre 1-car garage $46,000 Comp 3 - 0.5 acre 2-car garage $49,000.
$48,000. $3,000 adjustment for the garage space
A property is currently valued at $53,280 and sold 2 years ago for $36,000. What is the monthly rate of appreciation?
$53,280 - $36,000 = $17,280. $17,280/ $36,000 = 0.48 or 48%. 48% by 24= 2%
Use the following information to answer the question. Property A sold six months ago for $80,000, which is 10% above market value. Property B sold 3 months ago for $83,000. The buyer paid cash, and the sale price included a $5,000 tax lien absorbed by the buyer. Property C sold 1 year ago for $72,000, which is 10% under market value due to foreclosure on the property. Residential property is currently increasing 8% per year The current market value for Property B is:
$79,560
Cynthia is appraising a single-unit residence for the purpose of appealing the ad valorem assessment. The client is the property owner. Intended users are the owner and the assessor. The subject property is a brick Georgian with 4 bedrooms, 2 bathrooms, no central air, and a basement. She chooses a comparable sale that sold for $300,000 with a brick exterior, 4 bedrooms, 1.5 bathrooms, central air, and a basement. Brick is valued at $20,000; a 4th bedroom $10,000; a ½ bathroom $5,500; central air $3,000; and a basement at $20,000. After making the appropriate adjustments, what is the gross adjustment to this comparable sale?
$8,500
Given the following sales prices: $75,000; $92,000; $81,000; and $84,000. The median is
$82,500
Alice, a certified residential appraiser, is performing a sales comparison approach. As a part of her research, she has conducted an extensive survey of sales in a residential subdivision. She has found the following sales: $90,000; $95,000; $89,000; $101,000; $99,000; and $92,000. The mean of this sample is
$94,333
An appraiser is extracting adjustments in a neighborhood where houses are relatively similar except for the following features: a 2-bedroom house sold for $280,000, a 3-bedroom house sold for $310,000, and a 4-bedroom house sold for $330,000. What is the contributory value of a fourth bedroom?
($330,000 - $310,000 = $20,000)
An appraiser is trying to extract a GLA adjustment from market data. He has two sales: Monte Carlo Street has 2,146 square feet and sold for $330,000 while Porto Fino Lane sold for $365,000 and has 2,632 square feet. What is the market-extracted GLA adjustment per square foot?
($35,000/486). (2,632 - 2,146). $35,000 (365,000 - 330,000). $72
Harry is appraising a single-unit residence for lending purposes. The client is a bank, and another intended user is Fannie Mae. The subject property is a brick veneer ranch with 3 bedrooms, 1-bathroom, central air, and a crawl space. He chooses a comparable sale at 123 Main St as Sale 1. This sale sold for $200,000 and is a wood-sided ranch with 4 bedrooms, 2 bathrooms, central air, and a basement. Brick veneer is valued at $10,000; a 4th bedroom $5,000; a 2nd bathroom $7,500; central air $3,000; and a basement at $20,000. After making the appropriate adjustments, what is the net adjustment to Sale 1?
-$22,500
You determine that houses in the subject property's neighborhood have appreciated 5% per year for the last five years. An identical comparable property in the neighborhood sold 4 years ago for $100,000. What would be the current indicated value for the subject, based on this comparable?
1.05 x 1.05 x 1.05 x 1.05 = 1.2155 x 100,000 = 121,550.
A $400,000 sale had the following adjustments: fireplace (-$5,000); 4th bedroom (+$25,000); 2nd bathroom (-$10,000). The gross adjustment percentage is
10
A comparable property sold two days ago for $175,000. The same property previously sold for $165,000 six months ago. What is the indicated annual appreciation rate indicated by this sale and re-sale?
175,000-165,000= 10,000. $10,000/$165,000 = .0606 x 2 (to annualize the 6 month rate) = .1212, or 12.12%.
A residential subdivision has 400 units for sale. The developer and appraiser estimate an absorption rate of 6 units per month. Interest rates, employment, and other economic indicators are predicted to be stable for the next year. The appraiser is concerned about the impact of absorption on factors that might affect the sales and income approaches for individual units. She analyzes the absorption rate and absorption period. What is the anticipated absorption period?
22.2 quarters
A parcel is 500' x 1,000' and is functioning as a farm. A developer obtains an option on the farm for 3 years. The developer hires an appraiser to perform a highest and best use analysis of the farm. Two years after obtaining the option, the developer exercises the option and purchases the farm. The developer applies for and obtains a 5-year straight mortgage (interest-only) for $20,000,000. The monthly payments are $133,000 interest only. A balloon is due in 60 months. The projected lots will be 5,000 square feet each. The street will consume 32,000 SF. There will be common elements (park, softball field, greenbelt) that will take up 100,000 SF. What is the maximum number of lots this project could yield for the developer?
73 lots
A comparable property sold for $365,000 nine months ago. Values in the area are decreasing on a 5% per year basis. What would be the market conditions adjustment to this sale if it were used in an appraisal with a current effective date?
A downward adjustment of $13,688
What kind of an adjustment must be made when a comparable sale is superior to the subject property?
A minus (-) adjustment to the comparable
In a given situation, what is the best comparable?
A sale that is timely and has been verified with a party to the transaction
Which of the following situations would result in the best comparable?
A seller who has relocated to a more expensive home
Janet is appraising a house in an equestrian area. In order for a property to have a horse, it must be at least 20,000 square feet. Each additional 10,000 square feet allows the owner to have one more additional horse. Buyers typically pay a premium to board a horse on a residential property of about $75,000. In a neighborhood were most of the lots are between 20,000 and 25,000 square feet and sell for about $300,000, how should Janet handle the adjustment for a subject property with a 19,400 square foot lot if there are no other properties that closely resemble the subject?
Adjust for the horse premium based on a market derived $75,000
Which of the following is true regarding the paired sales technique?
Adjustments should be made by dollar amounts or percentages, depending on how the adjustment is derived from the market
Karen, an appraiser, is reviewing the following data: The subject property has air-conditioning and a two car garage. Sale X, a comparable property, sold recently for $240,000 and has a garage, but not air-conditioning (worth $3,000). Sale Y, another comparable property, recently sold for $220,000 and has air-conditioning, but not a two-car garage (valued at $9,000). Sale Z, another comparable property, recently sold for $275,000, has the identical amenities and features to the subject except that it is located in a better neighborhood. What is the best adjustment Karen could make to comparable X?
An adjustment for the air conditioning, $3,000
Jared, an appraiser, is reviewing the following data: The subject property has air-conditioning and a two-car garage. Sale X, a comparable property, sold recently for $250,000 and has a garage, but not air-conditioning (worth $5,000). Sale Y, another comparable property, recently sold for $220,000 and has air-conditioning, but not a two-car garage (valued at $8,000). Sale Z, another comparable property, recently sold for $275,000 and has the identical features of the subject except that it is located in a better neighborhood. What would be the best adjustment Jared could make to Comparable Y?
An adjustment for the garage, $8,000
The sales comparison approach would be least effective if applied to which of the following?
An inactive market
A comparable property sold for $465,000 nine months ago. Values in the area are increasing on a 5% per year basis. What would be the market conditions adjustment to this sale if it were used in an appraisal with a current effective date?
An upward adjustment of $17,438
A comparable property sold for $868,000 six months ago. Values in the area are increasing on a 5% per year basis. What would be the market conditions adjustment to this sale if it were used in an appraisal with a current effective date?
An upward adjustment of $21,700
Which of the following is an ideal situation for the sales comparison approach to produce the most credible results?
Appraisal of a condominium in a development with many recent sales
Comparable property A has a bedroom, valued at $10,000, that the subject lacks. Comparable property B lacks a bathroom, valued at $10,000, that the subject has. Comparable C is fifty years older than the subject. The age difference is valued at $10,000. All three comparables sold for $400,000 in the last six months. Which property has an adjusted value of $390,000?
Comparable A has an adjusted value of $390,000 because adjustments are made to the comparables, not the subject property. Comparables B and C require upward adjustments resulting in an adjusted value of $410,000. Comp A requires a downward adjustment of $10,000 resulting in an adjusted value of $390,000.
Comparable property A has a garage, valued at $15,000, that the subject lacks. Comparable property B lacks a bathroom, valued at $15,000, that the subject has. Comparable C is in a superior location. The location difference is valued at $15,000. All three comparables sold for $400,000 in the last six months. Which property has an adjusted value of $415,000?
Comparable B
An appraiser is using the sales comparison approach and must eliminate sales that do not meet the minimum criteria for being a legitimate comparable. What is usually the most important consideration during this process?
Conditions of sale
The comparable land sale is described as the NW1/4 of the SE1/4 and the S1/2 of the NE1/4 of Section 7, Township 4 North, Range 3 East of the Third Principal Meridian, all located in Hannah County, Illinois. The subject property is 100 acres. Land is valued at $10,000/acre. The indicated size adjustment is
Every section of land is 640 acres. Therefore, the size of the sale is: ¼ x ¼ x 640 = 40 acres; plus ½ x ¼ x 640 = 80 acres. 40 + 80 = 120 acres. The subject site is 100 acres. The difference is 20 acres x $10,000/acre = $200,000
Which of the following adjustments should be made first?
Financing
When making adjustments as part of the sales comparison approach, which of the following adjustments should be made first?
Financing terms
Which adjustment converts the transaction price of a comparable into a cash equivalent?
Financing terms
refer to question 87
For each sale, the sales price must be multiplied by the respective LTV. Therefore, A: $450,000 x .80 = $360,000; B: $425,000 x .75 = $318,750. Then we multiply the mortgage amounts by the respective points: A: $360,000 x .03 = $10,800. B: $318,750 x .01 = $3,187.50. The dollar amount of the points is halved: $10,800 x .5 = $5,400; B: $3187.50 x .50 = 1,593.25. Then these totals are subtracted from the sales prices to derive the indicated adjusted sales prices: A: $450,000 - $5,400 = $444,600 rounded to $445,000. And B: $425,000 - $1593.75 = $423,406.25 rounded to $424,000.
What should an appraiser do if he is analyzing a comparable sale that sold for more than the listing price and learns that the transaction included some appliances and a golf cart?
He should adjust the comparable for the contributory value of the personal property
Adam is appraising a house on the waterfront where some houses have private boat docks. The subject is 2,713 square feet, 3 bed 2 bath, 2-car garage, and boasts a waterfront location without a boat dock. The market-based adjustment for living area is $60 per square foot, a 3-car garage space is valued at $6,000, and the private dock is valued at $100,000. The waterfront amenity is worth about $150,000. One of the comps Adam selected is: Comparable 1, which recently sold for $1,320,000, is 2,978 square feet, 3 bed 2 bath, 3-car garage. The house is across the street from the waterfront, but has nice views from the second story. There is a fenced side yard suitable for the storage of a boat. A golf cart worth $1,150 was included in the sale. What is the indicated net adjustment amount for Comparable 1?
In Comparable 1, $150,000 for the waterfront - $15,900 for the square footage adjustment (2,978 - 2,713 = 265 x 60) - $6,000 for 3-car garage - $1,150 for golf cart = $126,950 in net adjustments.
What should an appraiser consider to qualify the recent sale of a house within the subject's neighborhood as a comparable?
It must have been a market competitor and an open market sale
A comparable has a feature that the subject property does not. In the sales comparison grid, what should the appraiser do?
Make a negative adjustment to the comparable if the market recognizes the value of the feature
A comparable property was sold subject to a special assessment. The subject property is not subject to such an assessment. What should the appraiser do?
Make an adjustment to the comparable property
Which of the following adjustments should be made last?
Physical characteristics
Which of the following often requires more than one adjustment in the sales comparison approach?
Physical characteristics
When using the sales comparison approach, what is the proper sequence for making adjustments?
Property rights, financing terms, conditions of sale, market conditions, location, and physical characteristics.
When appraising a new house based on plans provided by the builder, what should the appraiser do regarding upgrades such as flooring and security systems?
Reconcile these upgrades in the identifiable market and determine the impact, if any, on value
The figure below represents the subject property. Click here to open image. Sale A has 2,400 square feet. If the size adjustment is $40 per square foot, what is the adjustment to Sale A? refer to question 14
Rectangle: 50 x 40 = 2,000 sf. Trapezoid: ((40 + 20)/2) x 10 = 300 sf. Total: 2,300 sf. If Sale A is 2,400 sf, 2,400 - 2,300 = 100 sf difference x $40/sf = $4,000
The subject property is a 20-year-old Georgian style residence that is being refinanced. Sale A is also a residence. While it is a different style, Sale A is very similar to the subject property in many features. Sale B is exactly identical to the subject property physically but is located in a different neighborhood that is rather different from the subject property. Which sale should be used in the sales comparison grid?
Sale A should be used because it is next door to the subject, and is similar in physical features
Appraiser Bertha is appraising a parcel of vacant land with an area of one acre. She collects sales data for site sales in the subject neighborhood. She finds two sales that appear to be identical to each other in every way. Sale A $60,000 Sale B $70,000 Bertha discovers a difference in the zoning of the two lots. The zoning for Sale A is R-1 (single family residential), with a minimum buildable lot size of .75 acres. The zoning for Sale B is R-2 (single family residential), with a minimum buildable lot size of .50 acres. Bertha concludes the difference in sales prices is due to
Sale B can be subdivided and each resultant lot can accommodate one house
Which of the following property characteristics is least important when selecting a comparable to use?
Sale price
An appraiser should consider and perhaps make downward adjustments for what type of sale term?
Seller-paid points
An appraiser is appraising a house in an exclusive golf course development. She is using one comparable from an older, less desirable golf course neighborhood. How should she handle this situation?
She should extract a location adjustment and apply it to the comparable
You are appraising a residential property with a swimming pool in the Sweet Meadow neighborhood. In this neighborhood, swimming pools are considered to add value to a property. You have found comparable sales in the same neighborhood; however they are larger houses than the subject and do not have swimming pools. What should you do?
Subtract from the comparable for the difference in size and add for the value of the pool
How should an appraiser determine when to apply adjustments to comparable sales for differences such as square footage and a pool, and how much those adjustments should be?
The appraiser should extract the adjustments based on the actions of buyers and sellers in the market
Use the following information to answer the question: Property A sold six months ago for $80,000, which is 10% above market value. Property B sold 3 months ago for $83,000. The buyer paid cash and absorbed a $5,000 tax lien. Property C sold 1 year ago for $72,000, which is 10% under market value due to foreclosure on the property. Residential property is currently increasing 8% per year. What is the current market value for Property A?
The market value for Property A 6 months ago, plus 10%, equals $80,000. So X multiplied by 1.10 = $80,000 or X = $80,000 divided by 1.10 = 72,727, the market value of Property A 6 months ago. Add 4% for 6 months of appreciation. (8% per year divided in half). $72,727 multiplied by 1.04 = $75,636, the current market value for Property A.
The mean sales price in a suburban subdivision 12 months ago was $150,000. The mean sales price in the same subdivision is now $125,000. The subject property is being appraised with a current effective date. Sale A sold for $130,000 four months ago. The market conditions adjustment made to Sale A is
The original mean sales price is $150,000. The current average is $125,000. The difference is -$25,000. The percent change is $-25,000/$150,000 = -16.7% per year (-1.4% per month). Sale A sold for $130,000 four months ago. Assuming a steadily declining market, 4 months x -1.4% per month = -5.6% x $130,000 = -$7,280 market condition adjustment. Be aware of declining markets. Market condition adjustments can be negative.
Two properties sell simultaneously. They both sell for the same price and both sellers pay normal closing costs. However, one sale is an all cash transaction and the other uses an 80% loan with a 20% down payment. Which of the following is true?
The sellers net the same amount
You select a comparable sale that recently sold for $50 per square foot. You study the market and determine you need to make the following adjustments to the price of the comparable: Market conditions adjustment +8% Physical adjustment -5% Age adjustment -6% What is the value of the comparable sale per square foot?
The two negative adjustments add up to 11%. Subtract this from 1.00 (100%) to get 0.89. $54 x 0.89 = $48.06
Which of the following is true regarding comparables?
They should be the most similar to the subject property
Which of the following is normally true of houses that are listed substantially above market price?
They will not sell despite adequate market exposure and time
Why do appraisers use bracketing in the sales comparison approach?
To estimate the upper and lower limits of the value range
What should an appraiser do to obtain necessary information about comparables?
Use accurate information sources and verify the data
Which of the following statements is correct regarding the sales comparison approach?
When using the sales comparison approach, the appraiser adjusts the comparable properties to the subject property
Appraiser Edward is appraising a small townhouse owned in condominium in a rural community. The intended use is for mortgage lending purposes. The client, a small-town bank, has indicated to Edward that the mortgage will be sold into the secondary mortgage market. As Edward researches sales in the subject market, he realizes there are only four sales of condominium townhomes over the past five years. Three sales are from the past year; the fourth sale is the subject property itself. Edward wants to use that sale as a fourth comparable sale. "What could be a better comp than the subject itself?" Is using the subject property as its own comparable allowed?
Yes, as long as the intended users allow it, and the appraiser explains the necessity
An appraiser is using the sales comparison approach to value a residential property. He completed his initial reconciliation and determined that the quantity and quality of the comparable sales are insufficient to develop the sales comparison approach. To solve this problem, the appraiser should seek data from all of the following except:
a different property type.
An appraiser using the sales comparison approach must adjust for differences between the subject property and the comparables. The dollar value of a positive feature present in the subject property but not present in a comparable is __________, while the dollar value of a positive feature present in a comparable but not present in the subject property is _________.
added, subtracted
Theresa is appraising a parcel of land under contract for $470,000. She finds a similar parcel that sold for $500,000. However, her research shows the buyer of the sale allocated $25,000 for site preparation, to be spent after the closing, for grading and elevation work. Theresa's subject does not require such modification. If Theresa uses the site sale as a comparable, she should
adjust the sale upward $25,000
Qualitative analyses, such as relative comparison analysis, can be used in the sales comparison approach after quantitative analysis is concluded. The purpose of such qualitative analyses is to
allow for imprecisions in the subject market
An appraiser is using six sales in the sales comparison approach. The sales prices are: $100,000; $125,000; $105,000; $95,000; $119,000; and $99,000. To calculate the median, the appraiser must organize the sales into a(n)
array
Appraiser Patricia is performing a sales comparison approach. She has chosen sales that are inferior to her subject, as well as sales that are superior. She assumes the sales, once adjustments are made, will surround the value of the subject property. This process is known as
bracketing
Appraiser trainee Emilie is performing market research for her supervisory appraiser. The subject property is a mixed use property located in an urban area. Her instructions are to find sales that are both comparable and competitive with the subject property. A competitive property
competes head-to-head with the subject property
In the following list of possible adjustments, which one would be made first? Conditions of sale Location Physical features (condition, room count, etc.) Market conditions
conditions of sale
When ascertaining the value of an adjustment, the appraisal principle being applied is ______________. When making the adjustment, the appraisal principle being applied is ______________.
contribution; substitution
"Mary watches various fixer-upper shows on television. Convinced that "I can do that, too!" she buys a single-family home for $92,000. The house requires substantial repairs to the foundation, roof, and frame. Mary spends $75,000 on the repairs, but is confident she will get back "...more than I spend." Mary has the house appraised for mortgage lending purposes and is shocked when the value is rendered: $125,000. Mary then protests the appraisal to the lender, and threatens to report the appraiser to the state licensing agency. The appraiser explains that the market value of the subject property is based on market sales which average around $145,000 in the subject market. Although Mary repaired quite a bit, there was still much left to be done. Which appraisal principle best illustrates what happened to Mary?"
declining return on investment
A residential subdivision is currently being developed. The developer and appraiser are concerned about rising interest rates and how they might affect factors that influence the sales and income approaches for individual units. The appraiser starts to analyze the absorption rate and absorption period with the scenario of rising interest rates. The appraiser indicates that if interest rates rise the absorption rate will ______________ and the absorption period will ________________.
decrease; lengthen
Appraiser Simpson has plotted the results of research for land sales in the subject market. His subject site size lies outside the range of the known data. The process of drawing conclusions that extend outside the given range of data (either higher or lower) is known as
extrapolation
A comparable with the same site size as the subject would warrant a positive site adjustment:
if the comparable's site was partially in a flood plain, limiting usability.
Patrick is appraising a duplex for estate planning purposes. Patrick has collected sales data for the subject neighborhood. He has ordered his data in an array for analysis. He notes a straight-line, inverse relationship between sales price and living area: the larger the building, the lower the price per square foot. If Patrick's conclusion of value for the subject property is within the range of data, his analysis is called
interpolation
Appraiser John has received an assignment in a residential subdivision where one entity owns all the land. Homeowners rent the land their houses sit on, that is, the homeowners are tenants of the landowner. John is appraising one of the houses in this subdivision. John is appraising the
leasehold estate
While researching comparables, an appraiser finds a sale that resulted when the buyer exercised an option that had been agreed upon three years previously. The sales price of this sale:
may not be typical of the current market.
Appraiser Ted is analyzing the local market as part of his research in conducting a sales comparison approach. He is interested in the range of sales (low to high) and the mean, median, and mode of his sample. The mean, median, and mode are collectively known as
measures of central tendency
Click here to open image. Using the chart above, derive the range of adjusted sale prices for Sales A, B, and C. Assume that the seller paid the buyer's loan points as a seller concession and that seller-paid points have full contributory value in the subject market. Round indicated values to the nearest thousand. review question 51
or each sale, the sales price must be multiplied by the respective LTV. Therefore, A: $160,000; B: $199,500; and C: $175,500. Then each mortgage amount must be multiplied by the points. Thus: A: $160,000 x .02 = $3,200. B: $199,500 x .02 = $3,990. And C: $175,500 x 0 = 0. Assuming the points have full contributory value in the subject market, Seller concessions are always negative. Therefore, Sales A and B require negative adjustments. Sale C does not require an adjustment. The range is $195,000 - $206,010 (rounded to $206,000).
Which method estimates the value of an adjustment by using data from two sales where only one difference is present?
paired sales analysis
Appraiser Sam has been asked to appraise a parcel of land that is under contract for purchase. The grantor has reserved the mineral, oil, and gas rights. Sam will not appraise these subsurface rights. Sam is appraising a(n)
partial interest
Allie is appraising a 4-unit apartment building on an urban lot. She will perform a sales comparison approach and an income approach. The intended use is for listing the subject property. The client is the owner; another intended user is the listing broker who will use the appraisal to provide guidance for the list price. The broker will also produce a comparative market analysis (CMA) to help the broker and owner set a list price. Allie will most probably make market-derived adjustments in her sales comparison approach. In addition, she will use units of comparison in her analysis. Which unit of comparison will Allie most probably use for a 4-unit apartment building?
price per apartment unit
Which adjustment takes into account the differences in ownership between the subject property and the comparable?
property rights conveyed
An appraiser can extract an adjustment for market conditions by:
studying the sale and resale prices of the property.
Appraiser Sarah is performing a sales comparison approach for a residential appraisal. She has chosen four comparable sales based on style, age, size, location, and a variety of other features. Adjustments are made based on market extraction and data pulled from workfiles of properties that are similar to her subject property. The appraisal principle that is most likely being emphasized by Sarah is
substitution
Bob owns a buildable lot in a suburban area. He has purchased a vacant lot that is adjacent and has built a house that occupies both lots. The house is a typical size for the neighborhood, but his (now combined) lot is 40% larger than the average lot. Bob wishes to refinance. His lender hires an appraiser. Upon searching for comparable sales in the neighborhood, Appraiser Donald notes that the highest and best use of Bob's extra land is "landscaping." Donald tries to find comparable sales that (like the subject property) contain
surplus land
All of the following would make good comparables, EXCEPT a sale:
to a relative at below market price.
Each sale used as a comparable in an appraisal report should
use data that was verified by the buyer, seller or broker of each sale.
An appraiser must verify _________ before a sale may be used as a comparable property
whether any special concessions were granted by either party