In what situation might a blockage discount be applicable in an appraisal?

In what situation might a blockage discount be applicable in an appraisal?

• A. When assets are likely to appreciate in value
• B. When a large number of similar assets are offered for sale at once
• C. When evaluating individual assets in isolation
• D. When valuing unique properties with no comparables

Answer: (B)

A blockage discount is applicable in a situation where a large number of similar assets are offered for sale at once. This is because when many similar properties or assets are introduced to the market simultaneously, it can lead to an oversupply. The influx of these assets can depress prices as buyers may have more choices and, consequently, less competition among them. This scenario may require an adjustment in the appraised value to reflect the diminished market demand caused by the oversupply, hence the need for a blockage discount. In contrast, situations where assets are likely to appreciate in value, where individual assets are evaluated in isolation, or where unique properties lack comparables do not typically warrant a blockage discount. Each of these circumstances suggests a different market dynamic that would not necessitate an adjustment based on the volume of assets available.

A blockage discount is applicable in a situation where a large number of similar assets are offered for sale at once. This is because when many similar properties or assets are introduced to the market simultaneously, it can lead to an oversupply. The influx of these assets can depress prices as buyers may have more choices and, consequently, less competition among them. This scenario may require an adjustment in the appraised value to reflect the diminished market demand caused by the oversupply, hence the need for a blockage discount.

In contrast, situations where assets are likely to appreciate in value, where individual assets are evaluated in isolation, or where unique properties lack comparables do not typically warrant a blockage discount. Each of these circumstances suggests a different market dynamic that would not necessitate an adjustment based on the volume of assets available.