RPA Sales Comparison Approach

Question 1

What is the primary principle underlying the sales comparison approach to value?

Accepted Answer

The principle of substitution

Answer

The sales comparison approach is based on the principle of substitution, which holds that a prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute.

Question 2

When making adjustments in the sales comparison approach, adjustments are made to which property?

Accepted Answer

The comparable sale

Answer

Adjustments are always made to the comparable sale, not the subject property, to account for differences between the two.

Question 3

What does a negative (downward) adjustment to a comparable sale indicate?

Accepted Answer

The comparable is superior to the subject in that feature

Answer

A negative adjustment is applied when the comparable is superior to the subject in a given feature, reducing the comparable's price to reflect what it would have sold for without that superior feature.

Question 4

What is a 'paired sales analysis' used for in the sales comparison approach?

Accepted Answer

To isolate and quantify the value contribution of a single property feature

Answer

Paired sales analysis uses two sales that are identical except for one feature to isolate and quantify the market value contribution of that specific feature.

Question 5

What does a 'time adjustment' (market conditions adjustment) account for in the sales comparison approach?

Accepted Answer

Changes in market conditions between the comparable's sale date and the effective date of appraisal

Answer

A time adjustment accounts for changes in market conditions between when the comparable sold and the effective appraisal date, reflecting appreciation or depreciation in the market.

(RPA) Real Property Appraiser Certification Practice Test

(RPA) Real Property Appraiser Certification Practice Test

RPA Sales Comparison Approach