Humber/Ontario Real Estate Course 4 Exam Practice

What is a disadvantage of the direct comparison approach in property evaluation?

1. It is generally not accepted by the Courts.

2. Finding suitable comparables can be difficult, especially in small towns and rural locations.

3. It is hard for buyers and sellers to comprehend.

4. It always relies heavily on current sale prices only.

5. It is ineffective in a fluctuating market.

6. It tends to focus only on urban property prices.

The correct answer is: Finding suitable comparables can be difficult, especially in small towns and rural locations.

Finding suitable comparables can be challenging, particularly in small towns and rural areas, because the direct comparison approach relies on comparing the subject property to similar properties that have recently sold. In densely populated urban areas, there are typically many comparable properties available, which can simplify the evaluation process. However, in smaller or more rural markets, the number of transactions may be limited, and the types of properties that sell can vary significantly. This scarcity of comparable sales can make it difficult to derive a reliable value for the subject property, as there may not be enough data points to support an accurate assessment. Other options suggest concerns like acceptance in courts, comprehension issues, reliance on current prices, effectiveness in fluctuating markets, or urban focus, which may not be primary disadvantages associated with using the direct comparison method in property evaluation.