Property Valuation
In the sales comparison approach, when a comparable sale has a feature the subject property lacks, the appraiser should:
AAdjust the comparable's sale price upward
BAdjust the comparable's sale price downward✓ Correct
CDiscard that comparable
DIncrease the subject's value estimate
Explanation
If the comparable is superior to the subject (has a feature the subject lacks), the comparable's price is adjusted downward to reflect what it would have sold for without that feature.
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Key Terms to Know
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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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