Affiliate Broker Tennessee (TN PSI) National Practice Exam `

What are the two categories of comparison when evaluating comparables to a subject property in the market comparison approach?

1. Elements and units

2. Cost and benefits

3. Appraisal and investment

4. Value and market trends

The correct answer is: Elements and units

In the market comparison approach, the evaluation of comparables is fundamentally based on the identification and analysis of two crucial categories: elements and units. Elements refer to the various characteristics of properties, such as size, location, condition, and features like amenities and finishes. When comparing these elements, the appraiser assesses how the comparables measure up against the subject property to determine how those characteristics have influenced market value. Units are pertinent to how the properties are compared on a per-unit basis. This often involves calculating the price per square foot or price per unit when dealing with multi-family properties. By breaking down property values into standardized units, appraisers can make more accurate comparisons and adjustments based on the specific attributes of the properties under review. The combination of evaluating elements and units allows appraisers to form a more comprehensive understanding of how the subject property stands in relation to its comparables, ultimately aiding in establishing a fair market value. This method is essential in real estate appraisal as it reflects the actual market conditions and helps ensure accuracy in property valuations.