RPA Sales Comparison Approach 2 — Questions and Answers
Question 1: What is 'bracketing' in the sales comparison approach?
- Estimating value between two time periods
- Selecting comparables with features both superior and inferior to the subject (Correct answer)
- Averaging the adjusted sale prices of all comparables
- Excluding outlier sales from the analysis
Correct answer: Selecting comparables with features both superior and inferior to the subject
Bracketing means selecting comparables that bracket the subject property — some superior and some inferior — so the subject's value falls within the range of adjusted prices.
Question 2: When a comparable sale involved seller-paid closing costs (concessions) of $5,000, how should the appraiser treat this?
- Ignore it as it does not affect market value
- Add $5,000 to the comparable's sale price
- Subtract $5,000 from the comparable's sale price (Correct answer)
- Discard the comparable and find another
Correct answer: Subtract $5,000 from the comparable's sale price
Seller concessions inflate the stated sale price, so the appraiser subtracts the concession amount to arrive at a cash-equivalent or market price.
Question 3: What is the 'unit of comparison' in the sales comparison approach?
- The total number of comparable sales analyzed
- A common denominator used to compare properties of different sizes or types (Correct answer)
- The number of adjustments applied to each comparable
- The final adjusted value per square foot
Correct answer: A common denominator used to compare properties of different sizes or types
A unit of comparison (e.g., price per square foot, price per unit) is a common denominator that allows appraisers to compare properties of varying sizes or configurations on an equal basis.
Question 4: What does 'arm's length transaction' mean in real property appraisal?
- The transaction was completed without a real estate agent
- The buyer and seller acted independently with no special relationship or duress (Correct answer)
- The property was on the market for at least 30 days
- The sale was financed through a conventional mortgage
Correct answer: The buyer and seller acted independently with no special relationship or duress
An arm's length transaction is one in which buyer and seller act independently, are well-informed, and are not under undue pressure, producing a market-based sale price.
Question 5: Which of the following sales would MOST likely require exclusion or significant adjustment in a residential sales comparison approach?
- A sale that closed 9 months ago in an active market
- A sale between a parent and child at below-market price (Correct answer)
- A sale where the buyer used FHA financing
- A sale with a 60-day marketing period
Correct answer: A sale between a parent and child at below-market price
A sale between related parties is not arm's length and likely does not reflect market value, making it unsuitable as a comparable without significant investigation.
Question 6: In the sales comparison approach, 'verification' of a comparable sale primarily serves to confirm what?
- That the property was listed in the MLS
- That the sale was arm's length and the data is accurate (Correct answer)
- That the property was inspected before closing
- That the sale was recorded in the county records
Correct answer: That the sale was arm's length and the data is accurate
Verification confirms that the sale was an arm's length transaction and that the data used (price, date, features) is accurate, ensuring reliability of the comparable.
Question 7: What is the purpose of calculating a 'net adjustment percentage' for a comparable sale?
- To determine how much the comparable appreciated over time
- To assess the overall reliability of the comparable by measuring total adjustment magnitude (Correct answer)
- To convert the adjustment to a dollar-per-square-foot figure
- To determine the tax assessment ratio for the comparable
Correct answer: To assess the overall reliability of the comparable by measuring total adjustment magnitude
The net adjustment percentage (net adjustments divided by sale price) helps appraisers assess how much a comparable has been adjusted, with larger adjustments suggesting less reliability.
RPA Sales Comparison Approach 2
What is 'bracketing' in the sales comparison approach?