PSI Virginia Real Estate Practice Exam

What is an essential factor when selecting comparables for property valuation?

1. The size and condition of the property

2. The more dissimilar the comparable property, the better

3. The more similar the comparable is, the more reliable the estimate

4. The age of the properties being compared

The correct answer is: The more similar the comparable is, the more reliable the estimate

Selecting comparables for property valuation is a critical element in determining a property’s market value accurately. The emphasis on similarity in characteristics between the subject property and the comparables is vital because the more alike the properties are, the more reliable the estimate of value will be. This reliability stems from the assumption that properties that share essential attributes, such as location, size, layout, and condition, will exhibit similar market behaviors. When comparables have close alignment with the property being evaluated, variations in their market performance can be minimized, giving a clearer picture of what the property is worth in the current market. In addition, using properties that reflect the same market conditions helps in understanding price trends, providing a more thorough analysis based on empirical data points. Factors such as recent sales prices, square footage, and specific features of comparable properties offer insights into how a property might perform in the market. Therefore, relying on comparables that closely match the subject property is fundamental for achieving an accurate and justifiable property valuation.