What distinguishes transaction-based real estate indices?

• A. They are solely based on appraisals of properties
• B. They are derived from hypothetical property sales
• C. They are estimated from actual contemporaneous property sales
• D. They exclude recently sold comparable properties

Answer: (C)

Transaction-based real estate indices are characterized by their reliance on actual sales data rather than estimates or appraisals. These indices are constructed from real transactions that have occurred in the market, reflecting the prices at which properties have been sold.

This method captures the current market conditions and trends more accurately, as it is based on verified sale prices rather than subjective assessments or hypothetical scenarios. By using data from actual contemporaneous property sales, transaction-based indices provide a clearer and more reliable picture of market performance, allowing investors and analysts to make well-informed decisions.

The methodology of basing indices on real transactions helps to mitigate biases or inaccuracies that could arise from appraisals or estimates, thereby presenting a more trustworthy representation of property values over time.