Humber/Ontario Real Estate Course 3 Exam Practice

Which of the following statements about the direct comparison approach is correct?

1. It is hard for buyers and sellers to understand.

2. Finding comparable sales can be challenging in rural areas.

3. Courts do not generally accept this approach.

4. It always relies on current sale prices, making it very reliable.

5. It is the least accepted method among real estate agents.

6. It is time-consuming and rarely used.

The correct answer is: Finding comparable sales can be challenging in rural areas.

Finding comparable sales can indeed be challenging in rural areas due to the limited number of similar properties that have been sold recently. In urban settings, there may be many comparable properties available, making the direct comparison approach more straightforward. However, in rural areas, the lack of similar sales can complicate the process, leading to potential inaccuracies in valuation. The direct comparison approach is widely accepted and used in real estate appraisal, especially when sufficient comparable sales data is available. This method is based on the principle of substitution, which assumes that a buyer will not pay more for a property than the cost of acquiring a similar one in the same market. Therefore, the ability to find comparable properties is essential for the reliability of this valuation method, and the challenge in rural areas underscores its importance in the appraisal process.