Humber/Ontario Real Estate Course 4 Exam Practice

Which statement is true regarding the selection of comparable properties for valuation?

1. A good comparable sale should be physically similar in nature to the subject property being valued.

2. A good comparable sale does not need to be at arm's length.

3. A townhouse is a suitable comparable for a bungalow if both are on the same street.

4. A below-market sale, like a family transfer, can be a good comparable.

5. A comparable sale should ignore the number of bedrooms.

6. A recent sale must not be located further than one block from the subject property.

The correct answer is: A good comparable sale should be physically similar in nature to the subject property being valued.

The statement regarding the selection of comparable properties for valuation that is true is that a good comparable sale should be physically similar in nature to the subject property being valued. This is fundamental in the appraisal process, as comparables should closely match the characteristics of the property being assessed to ensure that the valuation reflects fair market value. When valuing a property, it is essential to consider factors such as size, type, age, condition, and location. Physically similar properties will have comparable features that impact their value. For instance, if the subject property is a two-storey home, it would not be appropriate to use a single-storey home as a comparable, as the difference in style and layout could lead to misinterpretations in value. The intent is to utilize comparables that provide a realistic snapshot of what the market value should be based on properties that buyers might also consider. The other options do not align as closely with standard valuation practices. For instance, sales that are not at arm's length can skew true market value; properties that differ significantly in style or structure should not be compared regardless of their geography, and factors like the number of bedrooms are significant in determining a property's value. Ignoring such dimensions would lead to a misunderstanding of the property's appeal