RAA Sales Comparison Approach 2 — Questions and Answers
Question 1: When making a paired sales analysis to extract an adjustment for a garage, an appraiser finds a property without a garage sold for $280,000 and a nearly identical property with a garage sold for $295,000. What is the indicated adjustment?
- $5,000
- $10,000
- $15,000 (Correct answer)
- $295,000
Correct answer: $15,000
The paired sales analysis indicates a $15,000 positive adjustment for the presence of a garage ($295,000 - $280,000).
Question 2: In the sales comparison approach, what does the term 'arm's length transaction' mean?
- The sale occurred within the past six months
- Both buyer and seller acted without undue pressure and with full market knowledge (Correct answer)
- The property was listed on the MLS for at least 30 days
- The sale price was verified by a licensed appraiser
Correct answer: Both buyer and seller acted without undue pressure and with full market knowledge
An arm's length transaction is one where buyer and seller are independent, knowledgeable, and act without compulsion or special relationships.
Question 3: An appraiser is adjusting for lot size differences. The subject has a 10,000 SF lot; Comparable A has an 8,000 SF lot and sold for $300,000. If the market indicates $2 per SF for lot size, what adjustment is made to Comparable A?
- -$4,000
- +$4,000 (Correct answer)
- -$20,000
- +$20,000
Correct answer: +$4,000
The comparable has 2,000 fewer SF than the subject, so a positive adjustment of $4,000 (+$2 × 2,000 SF) is added to the comparable.
Question 4: Which of the following best describes 'elements of comparison' in the sales comparison approach?
- The physical features of the subject property only
- The characteristics used to explain price differences between the subject and comparables (Correct answer)
- The list of properties rejected as comparables
- The final reconciled value of the subject property
Correct answer: The characteristics used to explain price differences between the subject and comparables
Elements of comparison are the specific characteristics—such as location, condition, and size—used to identify and measure differences between comparable sales and the subject.
Question 5: A comparable sale is described as a 'distressed sale.' How should an appraiser typically handle this sale?
- Use it as the primary comparable since distressed sales are common
- Apply a large upward adjustment to account for the distress
- Reject it or use it with extreme caution as it may not reflect market value (Correct answer)
- Average its price with other comparables to minimize its influence
Correct answer: Reject it or use it with extreme caution as it may not reflect market value
Distressed sales (foreclosures, short sales) often do not represent arm's length market transactions and should generally be excluded or treated with significant caution.
Question 6: In the sales comparison approach, what is the purpose of a 'time adjustment' (market conditions adjustment)?
- To account for the age difference between the subject and comparables
- To reflect changes in market prices between the comparable sale date and the effective appraisal date (Correct answer)
- To adjust for the time the property spent on the market
- To compensate for seasonal fluctuations in listing activity
Correct answer: To reflect changes in market prices between the comparable sale date and the effective appraisal date
A time adjustment corrects for appreciation or depreciation that occurred between the date a comparable sold and the effective date of the appraisal.
Question 7: An appraiser adjusts Comparable B upward by $8,000 for condition and downward by $3,000 for location. The net adjustment is +$5,000 and the gross adjustment is:
- $5,000
- $8,000
- $11,000 (Correct answer)
- $16,000
Correct answer: $11,000
Gross adjustment is the sum of the absolute values of all individual adjustments: $8,000 + $3,000 = $11,000, regardless of their direction.
RAA Sales Comparison Approach 2
When making a paired sales analysis to extract an adjustment for a garage, an appraiser finds a property without a garage sold for $280,000 and a nearly identical property with a garage sold for $295,000.
What is the indicated adjustment?