SAEE - Market Approach Application Questions and Answers Flashcards

An appraiser uses five comparables with adjusted values of $400,000, $402,000, $398,000, $450,000, and $401,000. What is the BEST course of action regarding the $450,000 comparable?

Answer: Give it the least weight due to its large divergence from the cluster

The outlier should remain in the analysis but receive minimal weight, with the appraiser explaining in the report why it diverges from the cluster.

Market conditions adjustments (time adjustments) should be based on:

Answer: Paired sales or resale data that demonstrate actual price change over time

Market conditions adjustments must be empirically derived from local paired sales or resale data, not national indices or subjective opinion.

What is the primary disadvantage of using a REO (bank-owned) sale as a comparable?

Answer: REO sales may reflect distressed conditions and may not represent arm's length market value

Foreclosure and REO sales may be priced below market due to seller urgency, limiting their reliability as market value indicators without adjustment.

When making a percentage adjustment for location, the appraiser should apply the percentage to:

Answer: The unadjusted sale price of the comparable

Percentage adjustments for location (and other features) are typically applied to the unadjusted sale price, before other adjustments are layered in.

A subject property has a pool and all four comparables lack pools. Paired sales indicate a pool adds $18,000. Which statement BEST describes this situation?

Answer: A positive $18,000 adjustment is added to each comparable's sale price

Since the comparables are inferior (no pool), add $18,000 to each comparable to account for the pool's market contribution.

Which scenario BEST justifies expanding the search area for comparables beyond the immediate neighborhood?

Answer: There are insufficient sales within the subject's neighborhood to form a credible analysis

Expanding the geographic search is appropriate and necessary when the immediate market lacks sufficient sales to support a credible analysis, provided the outside comps are properly adjusted.

In the sales comparison approach, 'elements of comparison' refer to:

Answer: The specific property and transaction characteristics used to identify and quantify differences between the subject and comparables

Elements of comparison are the attributes — such as financing, conditions of sale, market conditions, location, and physical characteristics — used to identify differences that require adjustment.