SAEE SAEE - Market Approach Application Questions and Answers 3 — Questions and Answers
Question 1: An appraiser is using the sales comparison approach and finds that a comparable sold for $320,000 but has a 2-car garage while the subject has a 1-car garage. Market data shows a 1-car garage adds $12,000 in value. What adjustment is made to the comparable?
- Add $12,000 to the comparable
- Subtract $12,000 from the comparable (Correct answer)
- Add $12,000 to the subject
- No adjustment is needed
Correct answer: Subtract $12,000 from the comparable
Since the comparable is superior (has a 2-car garage), you subtract $12,000 from the comparable's sale price to make it equivalent to the subject.
Question 2: Paired sales analysis is used primarily to:
- Determine the capitalization rate for income properties
- Isolate the market value contribution of a single feature (Correct answer)
- Calculate the gross rent multiplier for residential properties
- Establish the depreciation rate for improvements
Correct answer: Isolate the market value contribution of a single feature
Paired sales analysis compares two otherwise similar sales that differ in only one feature to isolate and quantify that feature's market contribution.
Question 3: A comparable sale closed 18 months ago at $280,000. Market data indicates values have increased 2% per year. What is the time-adjusted sale price?
- $288,480 (Correct answer)
- $291,200
- $288,800
- $286,720
Correct answer: $288,480
18 months = 1.5 years; $280,000 × (1 + 0.02)^1.5 = $280,000 × 1.03015 ≈ $288,442, closest to $288,480.
Question 4: In the sales comparison approach, 'bracketing' refers to:
- Averaging all comparable sale prices to find the subject's value
- Selecting comparables both superior and inferior to the subject for each key feature (Correct answer)
- Limiting adjustments to no more than 10% per line item
- Ranking comparables from lowest to highest sale price
Correct answer: Selecting comparables both superior and inferior to the subject for each key feature
Bracketing ensures the subject's value is supported by comparables on both sides of each attribute, reducing the risk of systematic bias.
Question 5: Which of the following is the CORRECT order for applying adjustments in the sales comparison approach?
- Location, then physical, then conditions of sale, then market conditions
- Conditions of sale, then market conditions, then location, then physical characteristics (Correct answer)
- Market conditions, then location, then physical characteristics, then conditions of sale
- Physical characteristics, then location, then market conditions, then conditions of sale
Correct answer: Conditions of sale, then market conditions, then location, then physical characteristics
The correct sequence is: (1) conditions of sale/financing, (2) market conditions (time), (3) location, then (4) physical characteristics.
Question 6: An appraiser derives the following adjusted values for three comparables: $415,000, $421,000, and $419,000. The subject property is most similar to Comparable 2. What value conclusion is MOST defensible?
- $415,000 because it is the lowest and most conservative
- $418,333 because it is the mathematical average of all three
- $421,000 because it reflects the most similar comparable (Correct answer)
- $419,000 because it is the median value
Correct answer: $421,000 because it reflects the most similar comparable
The most defensible value gives greatest weight to the comparable most similar to the subject, which is Comparable 2 at $421,000.
Question 7: A comparable sale had seller-paid closing costs of $8,000 that were not typical for the market. How should this be handled?
- Add $8,000 to the comparable's sale price as a financing adjustment
- Subtract $8,000 from the comparable's sale price as a conditions-of-sale adjustment (Correct answer)
- Ignore it because seller-paid costs are always market-typical
- Report it but make no adjustment since it affects the buyer, not the seller
Correct answer: Subtract $8,000 from the comparable's sale price as a conditions-of-sale adjustment
Seller-paid concessions inflate the nominal sale price; subtracting them converts the price to a cash-equivalent, market-typical basis.
SAEE SAEE - Market Approach Application Questions and Answers 3
An appraiser is using the sales comparison approach and finds that a comparable sold for $320,000 but has a 2-car garage while the subject has a 1-car garage.
Market data shows a 1-car garage adds $12,000 in value.
What adjustment is made to the comparable?