A builder is still selling homes in the subdivision where the subject property, a new two-story home, is located. The subject's buyer chose the builder's finished-basement option, and Comparable 2, the same model sold by the same builder last month, has an unfinished basement. The builder's current price list shows the finished-basement option at $31,000, and the builder's sales manager says options carry a 20% gross margin. A 2019 cost manual shows $22.50 per square foot for 900 square feet of basement finish. Both homes have the builder's $12,000 kitchen upgrade package. Agents active in the subdivision report that buyers treat the option as adding about what the builder charges. What amount should be added to Comparable 2's price for the basement finish?
Correct Answer
C) $31,000
Both homes are new, so no depreciation applies, and the best current cost evidence is the builder's own price list for the same option in the same subdivision; agents report buyers pay about that price. The builder's price includes the builder's margin, which is part of what a buyer pays to get a finished basement, so it should not be stripped out. The 2019 cost manual figure is out of date, and the kitchen package is on both homes and needs no adjustment.
Why This Is the Correct Answer
Option C is correct because the builder's current price list shows $31,000 for the same finished-basement option, and agents report buyers treat the option as adding about that amount. Both homes are new, so no depreciation is deducted, and the $31,000 is added to Comparable 2, which lacks the finish.
Why the Other Options Are Wrong
Option A: $20,250
Option A, $20,250, comes from the 2019 cost manual: $22.50 x 900 = $20,250. Building costs change constantly, and a figure several years old understates what buyers pay today when the builder's current price is available.
Option B: $24,800
Option B, $24,800, removes the builder's 20% margin: $31,000 x 0.80 = $24,800. A buyer cannot get the finish without paying the builder's full price, and the builder's profit is part of the cost of bringing the improvement to a finished state, so the adjustment is $31,000.
Option D: $43,000
Option D, $43,000, adds the $12,000 kitchen package to the $31,000 basement option. Both homes have the kitchen package, so it is not a difference between them and calls for no adjustment.
Builder's price list is current cost
In a new subdivision, the builder's current option price is today's cost of the upgrade, profit included; old manuals and shared features stay out.
How to use: Use this when a question pairs a builder's option price with older or partial cost figures.
Exam Tip
Check whether a feature is on both properties before adjusting, and prefer the most current cost source for the same item.
Common Mistakes to Avoid
- -Using an outdated cost manual when current builder prices exist
- -Removing the builder's profit from the cost of an option
- -Adjusting for a feature both homes share
Concept Deep Dive
Analysis
The question tests choosing current cost evidence for a cost-based adjustment in new construction. A builder's current price list for the same option is direct, current evidence of what buyers pay, and the facts confirm buyers treat the option as worth that price. The candidate must also recognize a shared feature and avoid removing the builder's margin.
Background Knowledge
Typical sources of cost information include published cost tables, building contractors, manufacturers' price lists and the costs of comparable new construction. Because costs keep changing, current figures are preferred over old ones. In new construction, a builder's option prices are often the most direct evidence of the cost of an upgrade.
Real-World Application
An appraiser valuing a new home in an active subdivision asks the builder for its option price sheet. She uses the current price of the finished-basement option to adjust a same-model comparable without the option and confirms with local agents that buyers treat options as worth about their price.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
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Previous Question
A verified pair of cash-equivalent sales in the same market has Q3/C3 at $548,000 and Q4/C3 at $513,000. Rights, terms, time and other material characteristics are matched. A suitable comparable sold for $513,000. The subject is Q3/C3; the comparable is Q4/C3. Assume the observed contribution applies and no other adjustments. What signed quality adjustment and adjusted comparable price result?
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A ranch home near the subject was sold by its owner to her cousin. In an interview, the listing agent confirms that the home was listed on the MLS for 34 days, typical for the area, drew two offers from other buyers, and closed at a price and terms in line with other recent sales. How may the appraiser treat this sale?