California Real Estate Practice Exam

When using the sales comparison approach, for which circumstance would you make a condition of sale adjustment?

1. A newly renovated property

2. A sale between relatives

3. Foreclosure

4. Long-term ownership

The correct answer is: Foreclosure

The reason for making a condition of sale adjustment is to account for any differences in the sale conditions between the subject property (the one being valued) and the comparable properties used in the sales comparison approach. In this case, a foreclosure sale would likely have different sale conditions (such as a distressed sale or motivated seller) compared to a regular market sale. Therefore, a condition of sale adjustment would be necessary to accurately reflect the market value of the subject property. The other options (A, B, D) do not necessarily require a condition of sale adjustment. A newly renovated property may have a higher value, but that would already be reflected in the sale price. A sale between relatives may have different motivations and negotiation strategies, but those would not necessarily impact the market value of the property. Long-term ownership may have an impact on the property's condition, but that could be reflected in the property