An appraiser finds a sale and re-sale of a property which occurred 18 months apart, indicating a 1.5% monthly decrease in value. What might be a problem with using this 1.5% market conditions adjustment in the sales comparison approach?

• A. This adjustment overemphasizes short-term fluctuations.
• B. This adjustment underestimates inflation.
• C. It ignores changes in market fundamentals.
• D. This adjustment assumes a steady decline over the entire period, which may or may not be accurate.

Answer: (D)

The main idea is that market conditions adjustments should reflect how values actually changed over the specific time span, not impose a fixed path of change. Applying a 1.5% decrease each month assumes a steady, uniform decline for the entire 18-month period. If the market didn’t move down in a perfectly uniform way—there were periods of stability, rebound, or slower declines—the constant rate would misstate how much value actually changed. The cumulative effect of compounding that constant rate can also exaggerate or understate the true shift, leading to an adjustment that may not be accurate for the sale and resale timeline.

So this choice highlights the flaw: it presumes a steady decline across the whole period, which may not match the real-market trajectory. While other concerns like short-term fluctuations, inflation, or changes in fundamentals can matter, they’re not as directly tied to the specific issue of assuming a constant rate of decline over the entire interval.