RAA Sales Comparison Approach 2

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?

Accepted Answer

$15,000

Answer

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?

Accepted Answer

Both buyer and seller acted without undue pressure and with full market knowledge

Answer

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?

Accepted Answer

+$4,000

Answer

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?

Accepted Answer

The characteristics used to explain price differences between the subject and comparables

Answer

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?

Accepted Answer

Reject it or use it with extreme caution as it may not reflect market value

Answer

Distressed sales (foreclosures, short sales) often do not represent arm's length market transactions and should generally be excluded or treated with significant caution.

(RAA) Certified Residential Accredited Appraiser Practice Test

(RAA) Certified Residential Accredited Appraiser Practice Test

RAA Sales Comparison Approach 2