Favorable mortgage financing may have a significant impact on the transaction price of the particular property. If the comparable property was known to have had favorable financing terms negotiated into the transaction price, which of the following adjustments should take place? (Note: Assume that the comparable property cannot be dropped from the analysis as there are already limited comparable sales transactions)
A) The transaction price of the comparable property should be adjusted downward.
B) The transaction price of the comparable property should be adjusted upward.
C) The transaction price of the subject property should be adjusted downward.
D) The transaction price of the subject property should be adjusted upward.

Question

Quizplus · Accepted Answer

If the comparable property had favorable financing terms negotiated into the transaction price, it means that the property was sold at a higher price than it would have been under normal financing terms. Therefore, to make a fair comparison, the transaction price of the comparable property should be adjusted downward to reflect the true value of the property. This adjustment will help to ensure that the transaction price of the subject property is based on fair market value.

Favorable Mortgage Financing May Have a Significant Impact on the Transaction