Question

You're valuing a single-family residence, and a home three houses away seems like a likely

candidate to use as a comparable. Unfortunately, your tests of comparability determine it
isn't appropriate. What did you learn that made you decide this?
The buyer was a broker.
The property was recently appraised.
There was no personal property included in the sale.
The sale was between relatives.

Answer 1

The home three houses away was not a suitable comparable because the sale was between relatives, indicating the transaction may not have been at a true market value. The correct answer is option: The sale was between relatives.

Step-by-step explanation:

When valuing a single-family residence, the comparability of recent sales in the area is key. In this case, the factor that made the home three houses away an inappropriate comparable was that 'the sale was between relatives'. This is a significant indicator that the transaction may not have been made at market value, as sales between relatives often occur at a less-than-market rate for various personal reasons.

Such sales are not considered 'arm's length transactions', which are necessary for a valid comparison in real estate appraisals. When collecting data for comparative analysis, it's important to confirm that the transactions reflect true market value, which may require reviewing a range of factors including the nature of the buyer, personal property inclusions, and arm's-length nature of the sale.