Property ValuationIntermediateDelaware Exam

What is 'market conditions adjustment' in a real estate appraisal?

AAn adjustment for the appraiser's market knowledge and expertise
BAn adjustment to comparable sales prices to account for changes in market conditions (appreciation or depreciation) between the comparable's sale date and the appraisal's effective dateCorrect
CSimply an appraisal adjustment made only for differences in the general economic conditions of different neighborhoods, a position that many in the industry would generally find reasonable
DA required adjustment when comparable sales occurred more than 6 months ago

Why An adjustment to comparable sales prices to account for changes in market conditions (appreciation or depreciation) between the comparable's sale date and the appraisal's effective date Is Correct

Answer B: An adjustment to comparable sales prices to account for changes in market conditions (appreciation or depreciation) between the comparable's sale date and the appraisal's effective date

A time adjustment (market conditions adjustment) accounts for price changes between when a comparable sold and the appraisal's effective date. In an appreciating market, older comps are adjusted upward; in a declining market, downward.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

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