Property Valuation
When a comparable sale used in a Utah appraisal was a foreclosure sale, the appraiser should:
AUse it without adjustment since it reflects market conditions
BConsider whether it represents an arm's-length transaction and may need to be excluded or adjusted✓ Correct
CAlways use it as the most conservative indicator of value
DGive it double weight as it reflects motivated selling
Explanation
Foreclosure/distress sales may not reflect arm's-length market conditions (where both parties act without compulsion). Appraisers must consider whether a foreclosure sale is representative of the market or requires an adjustment, or should be excluded from the analysis.
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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.
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.
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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