Comparable property selection and making dollar and percentage adjustments in the sales comparison approach to value.
30 cards · basic cards · AI-written, checked twice. Edit anything.
- What is the sales comparison approach?
Show answer
A valuation method that estimates property value using prices of comparable recently-sold properties.- How recent should a comparable sale be to remain valid?
Show answer
Generally 6-12 months; older sales require adjustment for market conditions.- What characteristics define a comparable property?
Show answer
Similar type, location, size, age, condition, and sold recently under arm's-length terms.- Why must a comparable sale be arm's-length?
Show answer
Arm's-length sales reflect true market conditions; related-party or forced sales distort prices.- What is a dollar adjustment?
Show answer
A fixed dollar amount added or subtracted to a comparable's sale price to account for a difference.- What is a percentage adjustment?
Show answer
An adjustment applied as a percentage of the comparable's sale price, used when feature value scales with price.- How many comparable sales should be included in an appraisal?
Show answer
Typically 3-5; at least 3 to support market value, more in complex markets.- What is a market conditions adjustment?
Show answer
An adjustment for price changes due to shifts in supply, demand, or economic factors over time.- When making a time adjustment, what assumption underlies it?
Show answer
Property values change at a measurable rate over time, reflected in market price trends.- How is a location adjustment determined?
Show answer
By analyzing differences in desirability, proximity to amenities, neighborhood characteristics, and market demand.- When should a dollar adjustment be used for physical differences?
Show answer
When the feature is measurable and market data supports a specific cost (e.g., per square foot).- How do you adjust for a feature present in the subject but absent in a comparable?
Show answer
Add a positive adjustment to the comparable's price to reflect the subject's advantage.- What is the typical cumulative adjustment limit?
Show answer
Cumulative adjustments should not exceed 15-20% of the comparable's sale price.- What should be done if cumulative adjustments exceed reasonable limits?
Show answer
Consider using a different comparable or weight it lower in the final value estimate.- Does adjustment sequencing affect the final adjusted value?
Show answer
No; the order of applying adjustments should not change the final result.
FlashKeepers