Property Valuation
An appraiser applies the sales comparison approach and finds three comparables with adjusted values of $385,000, $392,000, and $389,000. The appraiser gives the most weight to the comparable requiring the fewest adjustments. Which comparable most likely receives the most weight?
AThe comparable adjusted to $385,000✓ Correct
BThe comparable adjusted to $392,000
CThe comparable adjusted to $389,000
DAll three comparables are weighted equally
Explanation
The most reliable comparable in the sales comparison approach is the one requiring the fewest and smallest adjustments, as it is most similar to the subject property. The appraiser gives it the most weight, which in this case is the comparable adjusted to $385,000 (assuming it required the fewest adjustments — as stated in the question).
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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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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