Illinois real estate exam glossary
Sales comparison approach: adjust the evidence, then weigh it
The comparable has the better view. Does its price go up or down in your grid? Keep the subject as the benchmark. You are asking what that comparable would indicate if it had the subject's relevant characteristics, using the market's reaction to the difference.
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The short answer
The sales comparison approach develops a value indication by comparing the subject with competitive market evidence, especially verified closed sales. Identify the property interest, effective date and relevant characteristics; select and verify the best substitutes; make supported adjustments to the comparables; then reconcile the indications. For a value-relevant property feature, add when the comparable is inferior and subtract when it is superior. Adjustment amounts follow market reaction, not an automatic feature cost or national price-per-square-foot rule. Listings and contracts can support the analysis but are not completed sales.
Reviewed for October 2026. PSI national III.B.2 lists the sales comparison approach within Valuation, a broader category allocated eight of the 100 scored national broker questions. This page has no separate eight-question allocation. The exercises are original teaching questions, not recalled PSI questions, an appraisal or a validated readiness test. Fannie Mae policies below are identified lender-program examples with applicable exceptions and UAD requirements, not universal Illinois statutes or a complete audit of every appraisal assignment.
Start with comparability, not a target price
- Define what is being valued. Identify the property interest, value definition, effective date, intended use and relevant characteristics. A leased-fee sale, a fee-simple interest and a sale including business assets do not automatically provide interchangeable evidence.
- Find actual substitutes. Look for competition in use, physical and legal characteristics, location, condition and buyer demand. Distance and recency matter, but the nearest or newest sale is not automatically the best. Do not select only evidence that supports a desired answer.
- Verify the transaction. Confirm the source and important facts, including rights, price, contract and closing dates, concessions, financing, sale conditions and non-realty items. A deed price alone does not explain the whole transaction.
- Compare each sale with the subject. Establish whether a relevant feature is inferior, similar or superior and whether the market recognizes a difference. Keep the subject fixed and adjust the comparable evidence. State the supported amount and any percentage base or sequence.
- Check signs, totals and scope. Net adjustment preserves positive and negative signs; gross adjustment adds their absolute amounts. Small net totals can conceal large offsetting adjustments. The size of a total alone does not establish credibility or a universal rejection limit.
- Reconcile the evidence. Weigh relevance, verification, comparability and adjustment support. Explain the greatest weight and any outlier. A weighted calculation needs a reason for its weights; it does not replace judgment. Keep program-specific sales-range and final-reconciliation rules distinct.
| Issue | Question to ask | Action or limit |
|---|---|---|
| Inferior comparable feature | Is the comparable less valuable than the subject on this supported feature? | Add the supported amount to the comparable |
| Superior comparable feature | Is the comparable more valuable on that feature? | Subtract the supported amount from the comparable |
| Feature with no supported premium | Does the market recognize a difference? | Do not invent an adjustment from cost or preference alone |
| Concession | What price effect, if any, did the concession cause? | Seller cost is not automatically the adjustment; full-cost treatment can be supported |
| Market conditions | What changed from the comparable's contract date to the effective date? | Support the specific interval adjustment or its absence |
| Net adjustment | What is the signed sum? | Offsetting amounts cancel |
| Gross adjustment | What is the sum of absolute amounts? | Offsetting amounts do not cancel |
| Listing or pending contract | Is this a completed transaction? | Supporting market evidence, with its status clearly identified |
| Reconciliation | Which evidence deserves the most weight and why? | No mechanical averaging or predetermined target |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| Sale price and an opinion of market value | A sale price records one transaction. Market value is an opinion under the applicable definition and effective date. Unusual terms or motivations can affect how a transaction is used. | Do not assume the subject's asking price, contract price or every recorded price is automatically the final value opinion. |
| Closed sales and current offerings | Closed sales show completed transactions. Listings show asking competition; pending contracts can provide additional information but have not yet closed. | Keep the status clear. A listing is not converted into a closed comparable merely by placing it in a grid. |
| Feature cost and contribution | Cost measures expense. A feature adjustment measures supported market reaction in the relevant comparison. | A $70,000 kitchen addition may contribute $22,000 in the stated market. Neither figure is a universal national adjustment. |
| Concession cost and concession effect | Fannie Mae requires the comparable's concession adjustment to reflect attributable price effect, if any. A dollar-for-dollar adjustment is acceptable when the market reaction supports the full amount. | Do not teach either always deduct the seller's entire cost or never deduct the full cost. The program does not permit a positive concession adjustment. |
| Net and gross | Net sums signed amounts; gross sums their absolute values. When a question asks for percentages, use its specified denominator. The examples here use the original unadjusted sale price. | A small net adjustment can result from large positive and negative changes. It does not by itself establish a strong comparable. |
| Comparable-range and approach-range rules | Fannie Mae's sales-comparison topic places that approach's indication within the reported adjusted-comparable price range. Its final reconciliation topic places the final opinion within the range of the approaches used. | These are two program rules about different stages. Do not confuse raw sale prices, adjusted sale prices and the final set of approach indications. |
| Appraisal approach and a broker CMA | Sales comparison is a valuation approach. A broker CMA is a distinct product with Illinois definitions and requirements; using sales data alone does not turn it into an appraisal. | The method is not a license or a product disclaimer. The brokerage product and appraiser practice rules still matter. |
Work through the facts
The comparable lacks a valuable garage
The subject has a garage. A comparable sold for $410,000 without one. The exercise supplies a supported $24,000 positive garage contribution and no other differences.
- The comparable is inferior on the stated value-relevant feature.
- Add the supported amount to that sale.
- $410,000 + $24,000 = $434,000.
Answer: The adjusted comparable indication is $434,000, before any other adjustment. The subject's value is not independently raised by another $24,000.
The comparable has the superior view
A comparable sold for $625,000 with a superior lake view. The subject lacks it, and the supported view difference is $55,000.
- The comparable is superior on this line.
- Subtract the supported premium.
- $625,000 minus $55,000 = $570,000.
Answer: The adjusted indication is $570,000 before other differences. The stated market evidence supplies the premium; a lake view does not carry a fixed nationwide amount.
The concession effect is smaller than its cost
A comparable sold for $500,000 with a $15,000 seller financing concession. Verified analysis attributes a $9,000 price increase to that concession.
- Identify the price effect rather than copying the seller's expense.
- Subtract the supported $9,000 increase.
- $500,000 minus $9,000 = $491,000.
Answer: The concession-adjusted indication is $491,000 before other differences. If credible evidence instead attributed the full $15,000 increase to it, the supported deduction would be $15,000.
Offsetting adjustments need two totals
A $400,000 comparable receives supported adjustments of +$30,000, -$20,000 and +$5,000. Use the original sale price for percentages.
- Net = $30,000 minus $20,000 + $5,000 = +$15,000.
- Gross = $30,000 + $20,000 + $5,000 = $55,000.
- Net percentage = 3.75%; gross percentage = 13.75%; adjusted price = $415,000.
Answer: The net and gross totals answer different questions. Neither percentage alone proves that the sale must be accepted or rejected.
Use the specified time interval and base
Market evidence in the exercise supports a total 4% increase from the comparable's contract date to the appraisal effective date. Apply it to the stated $300,000 unadjusted price, then add a separate $10,000 feature adjustment.
- Time adjustment = $300,000 times 0.04 = +$12,000.
- After time: $312,000.
- Then add the separate feature amount: $322,000.
Answer: The stated adjusted indication is $322,000. The 4% applies to the full specified interval and base; it is not a monthly rate or a current market forecast.
A similar older sale can be stronger
A recent waterfront renovation differs substantially from an inland subject. A nine-month-old inland sale matches the subject's use, design, size and condition, with a supported time analysis.
- Recency does not erase major competitive differences.
- The older sale can provide a stronger substitute if the evidence supports it.
- Explain selection and the specific time adjustment, including a supported zero if appropriate.
Answer: The older sale may deserve more weight. Do not manufacture a time adjustment merely because it is older or expand neighborhood boundaries just to include a selected sale.
Explain a weighted reconciliation
Adjusted indications are $482,000, $489,000 and $515,000. The exercise states that verified reliability supports weights of 50%, 40% and 10%, respectively.
- Weights total 100%.
- $482,000 times 0.50 + $489,000 times 0.40 + $515,000 times 0.10 = $488,100.
- The unweighted average is about $495,333.33 and gives the weak third indication equal weight.
Answer: The stated supported weighted indication is $488,100. Fannie Mae permits a properly explained weighted-average technique; the weights and applicability cannot be justified solely by producing an attractive number.
Verification needs more than an interested source
An agent with a financial interest in the subject transaction supplies comparable sales. The assignment follows Fannie Mae's identified data-verification policy.
- The information is not automatically unusable.
- The appraiser must verify it through a source without a financial interest in the subject transaction.
- Record reliable source details and understand concessions, conditions, rights and property facts.
Answer: Use the specified disinterested verification. The policy concerns interest in the subject transaction; it does not say every person connected to the comparable sale is automatically forbidden.
Mistakes to avoid
- Adjust the subject whenever a comparable differs. Keep the subject as the benchmark and adjust the comparable evidence for the supported difference.
- A garage always means plus, and no garage always means minus. First identify which property has the value-relevant feature and what the market evidence supports.
- Use a national dollar-per-square-foot rule. Derive the adjustment from the competitive market and relevant area difference, rather than a universal shortcut or the entire sale's average unit price.
- Concessions always, or never, get a full-cost deduction. Measure their attributable price effect. A full-cost deduction is acceptable when that is the supported effect; the identified Fannie Mae policy bars a positive concession adjustment.
- A sale beyond one mile, older than six months or over an old adjustment threshold must always be rejected. Do not import arbitrary universal cutoffs. Apply the actual assignment and program rules and explain the evidence.
- Every weighted average is prohibited, or any weights are acceptable. Properly explained weighted techniques can be used under the identified policy. Unsupported weights do not become credible because the calculation is accurate.
- A demographic composition or a required target value can replace market analysis. Use objective, supported property and market evidence. Protected-class information and predetermined outcomes are not substitutes for credible analysis.
Check your understanding
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. Which principle helps explain the sales comparison approach?
- Substitution
- Mortgage amortization
- Escheat
- Tax recapture
Show answer and explanation
Answer: A. Substitution
Buyers compare competitive alternatives of similar desirability without a costly delay. Substitution also informs the other approaches; it is not exclusive to sales comparison.
2. A comparable lacks a feature that the subject has, and the exercise supplies a positive market contribution for it. What is the feature adjustment?
- Add an unsupported construction cost to both
- Subtract from the comparable
- Add the supported amount to the comparable
- Subtract from the subject
Show answer and explanation
Answer: C. Add the supported amount to the comparable
The comparable is inferior on the stipulated valuable feature, so adjust its indication upward toward the subject. The value relevance and amount require market support.
3. A comparable has a superior view with a supported $20,000 premium over the subject. What is the adjustment direction?
- Subtract $20,000 from the subject
- Subtract $20,000 from the comparable
- Add $20,000 to the comparable
- Always discard the comparable
Show answer and explanation
Answer: B. Subtract $20,000 from the comparable
The superior comparable's premium is removed to make its indication more comparable to the subject. The subject remains the benchmark.
4. A comparable has +$25,000 and -$10,000 adjustments. What are net and gross?
- $25,000 net and $10,000 gross
- $15,000 net and $15,000 gross
- +$15,000 net and $35,000 gross
- $35,000 net and $15,000 gross
Show answer and explanation
Answer: C. +$15,000 net and $35,000 gross
Net retains signs: 25,000 minus 10,000 = 15,000. Gross adds absolute amounts: 25,000 + 10,000 = 35,000.
5. What should determine a supported feature-adjustment amount?
- Every dollar of original construction cost automatically
- The amount needed to reach the contract price
- A national fixed rate for every property
- The relevant market's reaction to the difference
Show answer and explanation
Answer: D. The relevant market's reaction to the difference
Cost can be evidence, but contribution depends on the relevant market and comparison. Do not work backward from a desired number.
6. A concession costs $15,000 and causes a supported $9,000 price increase in a $500,000 comparable. What is the indication after that adjustment alone?
- $485,000
- $509,000
- $515,000
- $491,000
Show answer and explanation
Answer: D. $491,000
$500,000 minus the supported $9,000 effect = $491,000. The concession's cost is not automatically its attributable price effect.
7. Under the identified Fannie Mae policy, when is a dollar-for-dollar concession deduction acceptable?
- When market analysis supports that the price effect equals the full concession
- Whenever the concession is typical, without analysis
- Only when it produces a positive concession adjustment
- Never
Show answer and explanation
Answer: A. When market analysis supports that the price effect equals the full concession
The policy expressly permits full-cost treatment when the supported market reaction is the full amount. It rejects an automatic cost-only deduction and does not allow positive concession adjustments.
8. Which statement about Fannie Mae net and gross adjustment policy is accurate?
- The smallest net adjustment automatically wins
- There is no specific net or gross limit; evidence and support still matter
- Every gross adjustment above 25% is prohibited
- Every net adjustment above 15% is prohibited
Show answer and explanation
Answer: B. There is no specific net or gross limit; evidence and support still matter
Adjustment amount or count cannot be the sole determinant of acceptability. This does not mean that every large or unsupported adjustment is acceptable.
9. A supported total 4% time increase applies to a $300,000 base for the stated interval. What is the time adjustment alone?
- -$12,000
- +$4,000
- +$12,000
- +$120,000
Show answer and explanation
Answer: C. +$12,000
300,000 times 0.04 = 12,000. The stem supplies a total interval rate and base, not a monthly trend or a real current-market rate.
10. Which dates does the identified Fannie Mae time-adjustment analysis compare?
- The owner's birth date and mortgage maturity
- The comparable's contract date through the appraisal effective date
- Every twelve-month index regardless of the sale interval
- Only the closing date and today
Show answer and explanation
Answer: B. The comparable's contract date through the appraisal effective date
The actual negotiation interval can differ from the overall annual market trend. Time adjustments, including their absence, need support.
11. Which statement about an active listing is accurate?
- It is automatically a closed sale
- It must be ignored in every appraisal
- It proves the final market value by itself
- It can support market analysis but must retain its offering status
Show answer and explanation
Answer: D. It can support market analysis but must retain its offering status
An asking price shows current competition, not a completed bargain. Identify status and reliability and use the applicable program requirements.
12. Which statement about the general Fannie Mae minimum is accurate?
- Exactly one listing always replaces all sales
- Three closed sales are a universal Illinois statute
- Only the subject's street can be used
- The identified program generally requires at least three closed comparables, with specific requirements and exceptions
Show answer and explanation
Answer: D. The identified program generally requires at least three closed comparables, with specific requirements and exceptions
The minimum is a lender policy, with project and UAD provisions to check. It is not a universal count for every valuation or a general permission to replace required closed sales with listings.
13. For $482,000, $489,000 and $515,000 indications, supported weights are 50%, 40% and 10%. What is their weighted result?
- $495,333.33
- $488,100
- $515,000
- $482,000
Show answer and explanation
Answer: B. $488,100
241,000 + 195,600 + 51,500 = 488,100. The example supplies support for the weights; correct arithmetic alone would not establish it.
14. What does the identified Fannie Mae sales-comparison range rule concern?
- A guarantee that every approach must have the same number
- Every tax assessment in the county
- Only the unadjusted contract prices
- The sales-comparison indication within the range of the reported adjusted comparable prices
Show answer and explanation
Answer: D. The sales-comparison indication within the range of the reported adjusted comparable prices
The sales-comparison indication uses the adjusted-comparable range. The final reconciliation rule about the range of approaches used is a separate policy at a different stage.
15. A $400,000 comparable receives +$40,000 and -$40,000 adjustments. Using its original price, what are net and gross percentages?
- 10% net and 10% gross
- 20% net and 0% gross
- 0% net and 0% gross
- 0% net and 20% gross
Show answer and explanation
Answer: D. 0% net and 20% gross
The signed net is zero. Gross is $80,000, and 80,000/400,000 = 20%. The offset does not prove that no adjustment work occurred or automatically determine whether the comparable is acceptable.
Common questions
What is the sales comparison approach?
It develops an indication from competitive market evidence by verifying transactions, analyzing differences, adjusting comparable evidence where supported and reconciling the results. Closed sales, contracts and listings do not all have the same status. Define the property interest and effective date before deciding what is comparable.
Why is substitution important?
A buyer generally resists paying more for a property than for an equally desirable available substitute without a costly delay. That helps explain why competitive sales inform value. Substitution also supports the other approaches, so do not treat it as a principle exclusive to sales comparison or as a guarantee that every nearby asking price sets value.
Do I adjust the subject or the comparable?
In the comparison grid, keep the subject as the benchmark and adjust the comparable indication. For a supported valuable feature, add when the comparable is inferior and subtract when it is superior. First identify the properties and the market effect; an amenity does not have a universal sign or fixed dollar amount.
Are comparable adjustments based on cost?
Not automatically. They reflect market reaction to the relevant difference. Cost may support an analysis, but a $70,000 feature can have a stated $22,000 contribution, and the appropriate area adjustment need not equal the entire home's average sale price per square foot. Use the relevant market and avoid national shortcuts.
How are concessions adjusted?
Under the identified Fannie Mae policy, reflect the attributable effect on the comparable's price, if any. The seller's cost is not automatically that effect, and a concession being common does not automatically eliminate the need for analysis. A dollar-for-dollar deduction is acceptable when market reaction supports the full amount. Positive sales or financing concession adjustments are not allowed under that policy.
How do net and gross adjustments differ?
Net adds the signed amounts; gross adds absolute amounts. For +$30,000, -$20,000 and +$5,000, net is +$15,000 and gross is $55,000. On the original $400,000 price used in this example, those are 3.75% and 13.75%. The adjusted price is $415,000. Offsetting signs can make net look modest while the total adjustment activity is substantial.
Are there fixed net or gross adjustment cutoffs?
The identified Fannie Mae topic has no specific net or gross limits. Amount and count cannot be the sole acceptability test, but the analysis must still support the comparable and resulting value. Do not substitute old percentage shortcuts for actual current policy or assume that every large adjustment is acceptable.
Must every comparable be nearby and recent?
Similarity, competition and evidence matter alongside recency and distance. The identified program generally uses same-market sales when possible, allows appropriately explained competing-area evidence and permits older best indicators with explanation. Its guidance favors sales closed within twelve months while recognizing justified older evidence. Specific project requirements can be narrower. Do not expand the neighborhood boundary simply to include chosen comparables.
How many comparable sales are needed?
There is no single count for every assignment. Fannie Mae's identified general policy requires at least three closed comparables, with additional support and specific project requirements or exceptions. Contracts and listings can support the analysis, but that does not make them universal replacements for required closed sales. Lenders using UAD 3.6 must apply its policy supplement; this page is not a complete program checklist.
How do I handle time adjustments?
Analyze market changes from the comparable's contract date to the appraisal effective date under the identified policy. A positive twelve-month trend does not prove that every shorter interval increased. A supported zero can be correct. State the rate, interval, base and sequence for any calculation; do not silently change a total interval percentage into a monthly rate.
Should adjusted prices be averaged?
Do not default to an unweighted arithmetic mean. Evaluate reliability, relevance, verification and adjustment support. Fannie Mae's reconciliation topic expressly permits a properly explained weighted-average technique. Unsupported weights are not credible merely because they total 100% or yield the desired answer. The result must also satisfy the applicable program range requirements.
What are the two Fannie Mae range rules?
The sales-comparison topic says that approach's indication must fall within the range of the reported adjusted comparable prices. The final-reconciliation topic says the final reconciled indication must fall within the range of the approaches used in the report. Keep those stages and their inputs separate; raw sale prices are not interchangeable with either set.
Can an interested party provide comparable data?
Under the identified Fannie Mae source policy, an interested party can provide data, but the appraiser must verify it through a source without a financial interest in the subject transaction. Record specific reliable source information and enough facts about sale conditions, concessions, property characteristics and the transaction. Do not interpret this as a ban on every person involved in the comparable sale.
Is a CMA an appraisal using the same comps?
Illinois treats a broker CMA as a distinct product with its own definitions and requirements. Sharing sales evidence does not make it an appraisal or remove appraiser licensing rules and statutory exceptions. Read the product's purpose, authority and required disclosures. This glossary does not prepare a CMA, BPO, appraisal or appraisal review for a live property.
Does a zero net adjustment mean no differences existed?
No. A +$40,000 and -$40,000 pair has zero net but $80,000 gross. On a $400,000 original sale price, that is 0% net and 20% gross. Examine the differences, evidence and support; cancellation of signs is not proof of similarity or an automatic acceptance or rejection rule.
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Official sources and scope
The selected Fannie Mae topics are dated June 4, 2025 within the guide published October 7, 2026. They illustrate particular lender requirements and direct UAD 3.6 users to the applicable supplement. General comparison logic is not the same as a complete program checklist or Illinois product-licensing law. No full paid standards text is claimed as reviewed. Every dollar amount, rate, interval and weight in the exercises is stipulated teaching data, not a market quote or a property appraisal.
- PSI June 24, 2026: national Valuation outline
- IAAO Glossary, third edition: substitution and related valuation definitions
- 12 CFR 34.42(h): federal market-value assumptions
- Fannie Mae B4-1.3-08: comparable selection
- Fannie Mae B4-1.3-09: market-supported comparable adjustments
- Fannie Mae B4-1.3-11: reconciliation and explained weighting
- Fannie Mae UAD 3.6 supplement: September 2026 income policy
- Fannie Mae B4-1.1-04, June 4, 2025: supported and nondiscriminatory analysis
- 225 ILCS 454/1-10: CMA, BPO and ordinary-course compensation exclusion
- 225 ILCS 454/10-45: permitted uses and complete written-report contents
- 225 ILCS 458/5-5: appraisal licensing and selected exceptions
- Fannie Mae B4-1.3-07: comparison evidence and data verification
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.