Property Valuation
A Kentucky appraiser is reviewing a sale that occurred between a parent and adult child for $50,000 below market value. This sale:
AIs always a valid comparable
BMay not be an arm's-length transaction and may not reflect market value✓ Correct
CIs an excellent comparable because family sales are common
DMust be reported to KREC
Explanation
Sales between related parties (family members, related businesses) may not be arm's-length transactions reflecting true market value, and an appraiser should investigate and may exclude such sales from consideration.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
AppraisalA 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.
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