A comparable has $23,000 of gross adjustments on a $260,000 sale price: +$15,000 and −$8,000. What are the gross and net adjustment percentages?
Correct Answer
A) Gross 8.8%, net 2.7%
Why this is correct: Gross adjustment % = total absolute adjustments ÷ sale price = ($15,000 + $8,000) ÷ $260,000 = 8.8%. Net adjustment % = net adjustment ÷ sale price = ($15,000 - $8,000) ÷ $260,000 = 2.7%. Why the other choices are wrong: 'Gross 2.7%, net 8.8%' reverses the percentages. 'Both 8.8%, measured the same way' ignores that net accounts for offsetting. 'Gross 5.8%, net 3.1%' miscalculates the values. Exam tip: Gross measures overall dissimilarity; net measures the net adjustment direction.
Why This Is the Correct Answer
Gross adjustment is the sum of absolute values, so $15,000 plus $8,000 equals $23,000, and $23,000 divided by $260,000 equals 8.8%. Net adjustment keeps the signs, so a positive $15,000 combined with a negative $8,000 leaves $7,000, and $7,000 divided by $260,000 equals 2.7%. Gross is necessarily equal to or larger than the absolute value of net, which is a useful sanity check. Option A pairs them correctly.
Why the Other Options Are Wrong
Option B: Gross 2.7%, net 8.8%
This reverses the two figures, assigning the smaller number to gross and the larger to net. That is arithmetically impossible: gross uses absolute values and therefore can never be smaller than the absolute net. Recognizing that relationship lets you eliminate this option without computing anything.
Option C: Both 8.8%, measured the same way
Gross and net can be equal only when every adjustment carries the same sign, so nothing cancels. Here one adjustment is positive and one is negative, so they must differ. The option also asserts the two are 'measured the same way,' which erases the entire reason both metrics exist.
Option D: Gross 5.8%, net 3.1%
Neither 5.8% nor 3.1% corresponds to any defensible combination of $15,000, $8,000, and $260,000. It appears to be a pure arithmetic distractor for candidates who compute quickly and match on the shape of the answer rather than the values. Dividing $23,000 by $260,000 takes one keystroke and rules it out.
Gross Ignores Signs
Gross Grabs everything and ignores the plus and minus; Net Nets them out. Since gross throws away the signs, gross is always at least as big as the absolute net, so if an answer shows gross smaller than net, it is wrong before you calculate.
How to use: On any adjustment percentage question, add the absolute values first for gross, then add the signed values for net, and divide both by the sale price. Then scan the options and discard any where gross is smaller than net, which usually removes at least one distractor immediately.
Exam Tip
Both percentages are computed on the comparable's sale price, not the subject's indicated value, and a low net with a high gross is a red flag rather than a sign of a good comparable.
Common Mistakes to Avoid
- -Reporting a low net adjustment as evidence of comparability while ignoring a large gross adjustment
- -Preserving the signs when computing gross, which understates overall dissimilarity
- -Dividing by the subject's estimated value instead of by the comparable's sale price
Concept Deep Dive
Analysis
This question tests the two adjustment metrics appraisers and reviewers use to judge comparable quality. The gross adjustment percentage sums the absolute value of every adjustment, ignoring sign, and divides by the sale price; it measures how dissimilar the comparable is from the subject overall. The net adjustment percentage sums the adjustments with their signs, so offsetting positives and negatives cancel, and it measures the net direction and size of the correction. The two answer different questions, which is why review guidelines and lender requirements cite different tolerances for each, commonly around 25% gross and 15% net for residential work. A comparable can show a tiny net adjustment while carrying enormous gross adjustments, which signals a poorly matched comparable hiding behind cancellation.
Background Knowledge
You need the definitions of gross and net adjustment percentages, the fact that gross uses absolute values while net preserves signs, and the fact that both are expressed as a percentage of the comparable's sale price rather than of the subject's value. It also helps to know the typical review thresholds and that exceeding them calls for commentary rather than automatically disqualifying the comparable.
Real-World Application
A reviewer examining an appraisal sees a comparable with a net adjustment of only 1% but gross adjustments of 34%, driven by a large positive GLA adjustment offsetting a large negative condition adjustment. The reviewer asks the appraiser to justify the comparable's use, because the near-zero net conceals two substantial dissimilarities.
More Sales Comparison Questions
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Previous Question
Three comparables adjust to $412,000 (gross adj. 5%), $405,000 (gross adj. 22%), and $410,000 (gross adj. 8%). What is the best-supported value conclusion?
Next Question
An appraiser is reconciling three comparable sales for a subject property with 2,100 square feet. One comparable has 1,950 square feet and sold for $468,000; another has 2,250 square feet and sold for $495,000. The appraiser calculates a gross adjustment of +$18,000 for the first comparable and −$22,500 for the second. Which statement best reflects proper application of net versus gross adjustment logic in the sales comparison approach?