Humber/Ontario Real Estate Course 4 Exam Practice

When should adjustments be made in the direct comparison approach to appraising property?

1. When physical characteristics of the properties are not identical.

2. When the sale occurred over five months ago.

3. When there are no recent sales to compare.

4. When the lot size does not match exactly.

5. When the neighborhood characteristics vary greatly.

6. When two properties have the same square footage but differ in age by more than five years.

The correct answer is: When physical characteristics of the properties are not identical.

Adjustments should be made in the direct comparison approach to appraising property primarily when physical characteristics of the properties are not identical. This includes differences in the size, age, condition, and features of the properties being compared. The goal of making adjustments is to bring the comparable properties to a common basis for a more accurate valuation. For instance, if one property has a swimming pool and the comparable does not, an adjustment would need to be applied to reflect that difference in value accurately. This practice ensures that the appraisal reflects the true market value by accounting for any disparities in the essential attributes of the properties. The other scenarios, while they may influence the analysis, do not inherently necessitate adjustments in the context of the direct comparison method. For example, the timing of the sale (over five months ago) could impact market conditions but doesn't directly relate to making adjustments for distinguishing features. Similarly, if there are no recent sales, it may complicate the comparison process but does not trigger adjustments. Differences in lot size, varying neighborhood characteristics, or age discrepancies can influence overall appraisal but adjustments based specifically on physical characteristics are crucial for achieving an accurate and equitable value comparison.