Humber/Ontario Real Estate Course 3 Exam Practice

If an appraiser utilizes the direct comparison approach for a property appraisal, which factor is crucial?

1. Comparable property timing

2. Differences in financing terms

3. Extent of market trends

4. Size of the properties

5. Similarities in sale conditions

6. Location of both properties

The correct answer is: Size of the properties

The direct comparison approach, also known as the market approach, is a widely used method for appraising properties that relies on comparing the subject property with similar properties that have recently sold in the market. The primary factor in this approach is the characteristics of the properties being compared, which includes size. The size of the properties plays a significant role because it directly influences their value. Typically, the larger a property, the higher its value, assuming all other factors are equal. In the context of property appraisal, appraisers will look at comparable properties that have sold recently and adjust the value based on differences in size to arrive at a more accurate estimate of the subject property's market value. While other factors, such as location, financing terms, and sale conditions, are also relevant to the appraisal process, the size of the properties remains a pivotal consideration within the direct comparison method as it directly correlates to their market price.