A comparable cash price is $295,000. Its superior location requires a supported downward adjustment expressly equal to 6% of that COMPARABLE price. What adjusted price results? This is not a statement that its price equals 106% of a lower subject-location price.
Correct Answer
B) $277,300
295000×(1−0.06)=277300. Common errors: adjusting upward instead of downward gives $312,700; not adjusting the comparable gives $295,000; reporting only the adjustment gives $17,700.
Why This Is the Correct Answer
Option B is correct because a 6% downward adjustment on the comparable price is $295,000 × (1 − 0.06) = $295,000 × 0.94 = $277,300. The comparable's superior location means its price must be reduced to reflect the subject's location. The answer asks for the adjusted price, not the adjustment amount.
Why the Other Options Are Wrong
Option A: $17,700
Option A is wrong because $17,700 is only the adjustment amount: $295,000 × 0.06 = $17,700. The question asks for the adjusted price, which is $295,000 − $17,700 = $277,300.
Option C: $295,000
Option C is wrong because $295,000 is the unadjusted comparable price. The superior location requires a 6% downward adjustment, giving $277,300.
Option D: $312,700
Option D is wrong because $312,700 comes from adjusting upward instead of downward: $295,000 × 1.06 = $312,700. The comparable is superior, so the correct result is $295,000 × 0.94 = $277,300.
Read the Base First
Before applying any percentage, identify the base it is a percent of and which way it moves the comparable.
How to use: Use this check on each percentage adjustment question before multiplying.
Exam Tip
Notice whether the question asks for the adjustment or the adjusted price, since both figures are usually offered as choices.
Common Mistakes to Avoid
- -Adjusting a superior comparable upward
- -Reporting the adjustment amount instead of the adjusted price
- -Using the wrong base for the percentage
Concept Deep Dive
Analysis
This question tests applying a percentage adjustment based on the comparable's own price and in the right direction. The comparable has the superior location, so its price goes down. The 6% is expressly a share of the comparable price, so the adjusted price is 94% of $295,000.
Background Knowledge
Percentage adjustments are often used for location and market conditions. The base for the percentage matters, and this question states that the base is the comparable's price. The direction follows the usual rule: a superior comparable is adjusted down.
Real-World Application
A comparable sits in a more desirable school area than the subject. Market analysis supports a location difference equal to 6% of the comparable's price. The appraiser reduces the comparable's $295,000 price by $17,700 to an adjusted $277,300.
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