Humber/Ontario Real Estate Course 3 Exam Practice

Which attribute is most important when selecting comparable properties for a direct comparison approach?

1. Comparable sale should be physically similar to the property being valued

2. Comparable sale need not be at arm's length

3. Two-storey townhouse is a good comparable to a bungalow if on the same street

4. Below market value family sale is a good comparable

5. Comparable properties must have an identical number of bedrooms

6. Properties must be in different neighbourhoods for comparison

The correct answer is: Comparable sale should be physically similar to the property being valued

The most important attribute when selecting comparable properties for a direct comparison approach is that the comparable sale should be physically similar to the property being valued. This is crucial because the purpose of using comparable sales is to derive a fair and accurate market value based on properties that are alike in terms of size, condition, age, and features. When properties share these physical characteristics, any observed price differences can be attributed more directly to variations in specific attributes rather than to inherent differences in property types. For instance, using a newly constructed two-storey home as a comparable for an older single-storey home would likely lead to inaccurate conclusions about value due to their different attributes and market appeal. Therefore, focusing on physical similarities ensures the assessment reflects real market conditions, promoting a more reliable and defensible valuation.