A 12,400-square-foot warehouse is valued by sales comparison using price per square foot, the unit buyers in this market use. Three comparables adjust to $96.50, $101.00 and $92.00 per square foot, and the appraiser weights them 50%, 30% and 20% in that order based on comparability. Without rounding the unit value, what is the indicated value?
Correct Answer
C) $1,202,180
The weighted unit value is 0.50 x $96.50 + 0.30 x $101.00 + 0.20 x $92.00 = $96.95 per square foot, and $96.95 x 12,400 = $1,202,180. $1,185,440 reverses the weights, $1,196,600 uses the simple average of $96.50, and $1,202,800 rounds the unit value to $97 before multiplying, which the stem rules out.
Why This Is the Correct Answer
Option C is correct because the weighted unit value is 48.25 + 30.30 + 18.40 = $96.95 per square foot, and applying it to 12,400 square feet gives $1,202,180. The weights follow the stated order, so the most comparable sale at $96.50 carries half the weight.
Why the Other Options Are Wrong
Option A: $1,185,440
Option A, $1,185,440, applies the weights backwards (20%, 30%, 50%), giving 19.30 + 30.30 + 46.00 = $95.60 per square foot x 12,400. That puts the most weight on the sale the appraiser judged least comparable.
Option B: $1,196,600
Option B, $1,196,600, uses the simple average of $96.50 per square foot x 12,400. It ignores the comparability weights the appraiser assigned; the weighted figure is $96.95, giving $1,202,180.
Option D: $1,202,800
Option D, $1,202,800, rounds the weighted unit value up to $97.00 before multiplying by 12,400. The stem says not to round the unit value, and the unrounded $96.95 gives $1,202,180.
Weight the unit, then multiply
Reconcile the adjusted price per square foot first, then multiply by the subject's area. Keep full precision until the end.
How to use: Use this when comparables are expressed per square foot, per unit or per room and the stem asks for a total value.
Exam Tip
Small rounding of a unit value is magnified by the subject's size, so carry decimals until the final step.
Common Mistakes to Avoid
- -Reversing the order of weights
- -Averaging unit values without weights
- -Rounding the unit value before multiplying by the subject's size
Concept Deep Dive
Analysis
This tests weighting comparables on a unit-of-comparison basis and then converting the weighted unit value to a total value. Two steps are needed: a weighted average of the adjusted price per square foot, then multiplication by the subject's size. The distractors come from reversed weights, an unweighted average and premature rounding.
Background Knowledge
Units of comparison should match what buyers and sellers in the market use; industrial buildings are commonly compared on price per square foot. Adjusted unit values from each comparable are reconciled within the approach, with the greatest weight on the closest comparables, and the result is applied to the subject's units.
Real-World Application
An appraiser values a 12,400-square-foot distribution warehouse using three industrial sales analyzed per square foot. The closest sale in age and clear height gets half the weight, and the report shows the weighted unit value and the resulting total.
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