Humber/Ontario Real Estate Course 4 Exam Practice

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Which fact is true regarding the direct comparison approach to property valuation?

  1. A time adjustment is unnecessary if the sale was recent.

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

  3. A plus adjustment is made if a comparable feature is superior.

  4. Few recent comparables can limit the approach's effectiveness.

  5. A negative adjustment is made if a comparable feature is inferior.

  6. The approach is not valid for old properties.

The correct answer is: Few recent comparables can limit the approach's effectiveness.

The correct fact regarding the direct comparison approach to property valuation is that few recent comparables can limit the approach's effectiveness. This statement highlights the importance of having a sufficient number of recent comparable sales to ensure an accurate and reliable valuation. When there are limited recent comparables available, it can restrict the appraiser's ability to make a fair comparison and may result in a less precise valuation. The scarcity of recent comparables can lead to challenges in determining the current market value of the property, affecting the reliability of the direct comparison approach in such cases. Regarding the other options: A. A time adjustment may still be necessary even if the sale was recent to account for any changes in market conditions. B. It is preferable for a comparable to be at arm's length to ensure an unbiased transaction. C. A plus adjustment is made if a comparable feature is inferior, not superior. E. A negative adjustment is made if a comparable feature is inferior, not superior. F. The direct comparison approach can be used for properties of any age, not just for new properties.

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