Sales Comparison Approach Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Sales Comparison Approach flashcards as text
When the subject property is a proposed construction (hypothetical condition), the appraisal's effective date is:
Answer: As of the prospective completion date specified in the hypothetical condition
For a prospective appraisal of proposed construction, the effective date is the assumed future completion date under the hypothetical condition stated in the report.
An appraiser discovers that a high comparable sale price resulted from the seller including $15,000 of personal property (appliances, furnishings). The appraiser should:
Answer: Make a downward adjustment of $15,000 to that comparable's sale price
Personal property is not real property; its value must be deducted from the comparable's sale price to isolate the real property component.
The concept of 'market conditions adjustment' (time adjustment) is necessary because:
Answer: Property values change over time and comparables must reflect current market conditions
Markets appreciate or depreciate over time, so older comparable sales must be adjusted to reflect the value level at the effective appraisal date.
A 'REO' (real estate owned) sale is often excluded from the sales comparison grid because:
Answer: Bank-owned properties frequently sell below market due to the seller's motivation to liquidate
Financial institution sellers of REO often accept below-market prices to clear inventory quickly, making these non-arm's-length for typical market value purposes.
The term 'effective age' as used in the sales comparison approach refers to:
Answer: The age indicated by the condition and utility of the improvements regardless of actual age
Effective age reflects how old a property 'acts' based on its maintenance and condition, which may differ significantly from its actual chronological age.
When appraising a unique property with very few comparable sales, the appraiser should:
Answer: Expand the search area, time frame, or property type to find meaningful comparables, with appropriate adjustments
Expanding geographic scope, time frame, or using similar property types with appropriate adjustments is preferred over abandoning the approach altogether.
In a declining market, an appraiser selecting comparables from 12 months ago would most likely apply adjustments that are:
Answer: Negative (downward) to reflect that prices were higher then
In a declining market, prices were higher in the past, so older comps must be adjusted downward to reflect the lower current market level at the effective date.