Humber/Ontario Real Estate Course 2 Exam Practice

What statement is correct regarding the selection of comparable properties for the direct comparison approach?

1. A good comparable sale should be physically similar in nature to the three-bedroom subject property being valued.

2. A two-storey townhouse that recently sold would be a good comparable to a three-bedroom bungalow, if both the subject property and the comparable sale are located on the same street.

3. A good comparable sale need not be at arm's length, as this has little bearing on the merits of that sale for comparison purposes.

4. A recent below market value, mother-to-daughter sale of a three-bedroom home, just one block from the subject property, would be a good comparable.

5. A two-storey townhouse that recently sold would be a good comparable to a three-bedroom bungalow, if both the subject property and the comparable sale are located in the same region.

6. A recent above market value, aunt-to-niece sale of a three-bedroom, just one block from the subject property, would be a good comparable.

The correct answer is: A good comparable sale should be physically similar in nature to the three-bedroom subject property being valued.

In the direct comparison approach, selecting comparable properties is crucial for an accurate valuation. The correct statement from the options provided is "A good comparable sale should be physically similar in nature to the three-bedroom subject property being valued." This statement highlights the importance of choosing comparable properties that are similar in physical characteristics to the subject property. This similarity helps in making a more accurate comparison and estimation of the subject property's value. By selecting comparable properties that closely match the subject property in terms of features like size, layout, amenities, and condition, the appraiser can make more reliable adjustments and arrive at a more accurate valuation. Options B, D, and F present scenarios where the sales may not be considered ideal comparables due to factors like the type of property, relationship of the parties involved, or market conditions at the time of the sale. Option C is incorrect because transactions not conducted at arm's length may not reflect the true market value of a property. While location is an important factor in selecting comparables, Option E is not as precise as Option A in emphasizing the need for similarity in physical attributes between the subject property and the comparables.