Real estate appraisal is often considered "more art than science," since identifying truly comparable properties is a subjective process. Therefore, it is essential that a comparable property transaction at least meets the requirement that it was fairly negotiated under typical market conditions. Which of the following types of transactions would be most appropriate for use in the sales comparison approach to valuation?
A) Commingled business transactions
B) Low-interest financing programs
C) Real estate auctions
D) Arm's-length transactions

Question

Quizplus · Accepted Answer

Arm's-length transactions are the most appropriate type of transaction to use in the sales comparison approach to valuation because they involve buyers and sellers who are acting in their own self-interest and are not subject to any undue pressure or outside influence. These transactions are considered to be the most reliable indicator of a property's market value since the parties involved have negotiated freely and under typical market conditions. Commingled business transactions, low-interest financing programs, and real estate auctions may involve special circumstances that could affect the price paid for a property and are therefore less reliable for use in the sales comparison approach.

Real Estate Appraisal Is Often Considered "More Art Than Science