Property Valuation
What is a 'paired sales analysis' used in real estate appraisal?
AA. Comparing two properties with the same listing agent to determine commission rates
BB. Comparing two sales that are identical except for one feature to isolate the market value of that feature✓ Correct
CC. Pairing the income approach with the cost approach for a more reliable estimate
DD. Comparing the asking price and selling price of properties to determine negotiating power
Explanation
Paired sales analysis (matched pair analysis) identifies two comparable sales that differ only in one characteristic to isolate that feature's market value contribution. For example, finding two similar homes with the same features but different lot sizes allows the appraiser to quantify the value difference attributable to lot size alone.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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