Property Valuation
A Vermont appraiser who determines that a comparable sale was a 'distress sale' (foreclosure or estate sale) should:
AUse the distress sale as a primary comparable without adjustment
BUse the sale with caution or exclude it if it does not reflect arm's-length market conditions, noting the distress circumstances in the report✓ Correct
CAdd the distress discount back to the sale price
DUse the assessed value instead
Explanation
USPAP and appraisal standards require appraisers to use arm's-length transactions (voluntary buyer and seller, neither under unusual compulsion) as comparables. Distress sales (foreclosures, estates) may not reflect market value and should be used cautiously or excluded, with the appraiser explaining their reasoning.
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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.
Math Concepts
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