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 comparable property should not be adjusted.
D)There is no way to estimate the price of the subject property.

Question

Quizplus · Accepted Answer

If the comparable property had favorable financing terms negotiated into the transaction price, the transaction price of the comparable property should be adjusted downward. This is because the favorable financing terms were not related to the market value of the property itself, but rather to the financing being offered. Adjusting the transaction price downward will account for this extra consideration that was included in the sale.

Favorable Mortgage Financing May Have a Significant Impact on the Transaction