Recorded comparable price is $275,000. Market evidence expressly attributes $6,000 of that price to financing concessions, not merely the concession’s seller cost. Remove that verified price effect first, then apply a supported total 3% time increase to the cash-equivalent balance. What result follows?
Correct Answer
A) $277,070
(275000−6000)×1.03=277070. Common errors: adding the concession effect instead of subtracting it gives $289,430; leaving out the concession adjustment gives $283,250; applying the time adjustment before removing the concession effect gives $277,250.
Why This Is the Correct Answer
Option A is correct because removing the verified concession effect gives $275,000 − $6,000 = $269,000, and applying the 3% time increase gives $269,000 × 1.03 = $277,070. Concession adjustments reflect the impact on the sale price and are negative, since positive adjustments for concessions are not acceptable. The time factor then applies to the cash-equivalent price as the stem directs.
Why the Other Options Are Wrong
Option B: $277,250
Option B, $277,250, applies the time adjustment before removing the concession effect: $275,000 × 1.03 − $6,000 = $277,250. The stem says to remove the concession effect first, giving ($275,000 − $6,000) × 1.03 = $277,070.
Option C: $283,250
Option C, $283,250, leaves out the concession adjustment: $275,000 × 1.03 = $283,250. Removing the $6,000 effect first gives $277,070.
Option D: $289,430
Option D, $289,430, adds the concession effect instead of subtracting it: ($275,000 + $6,000) × 1.03 = $289,430. Concessions that inflated the price are deducted, giving $277,070.
Clean the price, then time it
First strip out concession effects to get a cash-equivalent price, then apply the percentage time adjustment to that figure.
How to use: Use this when a question combines a concession adjustment with a percentage time adjustment.
Exam Tip
Follow the sequence the stem gives, because the order changes the result when a percentage is involved.
Common Mistakes to Avoid
- -Adding a concession adjustment to the comparable's price
- -Applying the time percentage before removing the concession effect
- -Using the seller's cost of the concession instead of its verified price effect
Concept Deep Dive
Analysis
This question tests the order and direction of a concession adjustment followed by a time adjustment. The verified $6,000 price effect of financing concessions is removed first to reach a cash-equivalent price. The 3% time increase is then applied to that cash-equivalent balance.
Background Knowledge
Sales or financing concessions can inflate a recorded price, so the comparable is adjusted to a cash-equivalent basis reflecting the market impact, if any. The adjustment uses the verified effect on price, which may differ from the seller's cost. When adjustments are applied in sequence, a percentage adjustment applied to a different base gives a different result.
Real-World Application
A comparable's recorded price included seller-paid financing incentives that market analysis shows raised the price by a measurable amount. The appraiser deducts that verified effect, then applies a supported market conditions increase for the months since the sale.
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?
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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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