A comparable indicates $150.00 per square foot. The subject contains 2,050 square feet. What value does this unit of comparison indicate for the subject?
Correct Answer
A) $307,500
Why this is correct: the rate is applied to the subject’s own area. Calculation: 2,050 × $150.00 = $307,500. Why the other choices are wrong: $285,000 is the comparable’s unadjusted sale price, which is what the unit of comparison exists to move away from; $300,000 and $315,000 apply the rate to 2,000 and 2,100 square feet rather than to the subject’s 2,050.
Why This Is the Correct Answer
Why this is correct: the rate is applied to the subject’s own area. Calculation: 2,050 × $150.00 = $307,500. Why the other choices are wrong: $285,000 is the comparable’s unadjusted sale price, which is what the unit of comparison exists to move away from; $300,000 and $315,000 apply the rate to 2,000 and 2,100 square feet rather than to the subject’s 2,050.
More Sales Comparison Questions
A property generates $85,000 in Net Operating Income and sells for $1,062,500. What is the overall capitalization rate?
A property has potential gross income of $180,000, vacancy and collection loss of $15,000, and operating expenses of $65,000. What is the Net Operating Income?
A comparable sale occurred 8 months ago for $425,000. Market conditions indicate property values have increased 0.5% per month since that time. What is the adjusted sale price?
A property generates $150,000 in potential gross income. Market data indicates a 7% vacancy rate and operating expenses of 35% of effective gross income. If the cap rate is 9.5%, what is the indicated value?
A property sold for $320,000 one year ago. If market conditions have improved by 6% since that sale, what is the time-adjusted sale price for comparison purposes?
A commercial building cost $2,500,000 to construct. The land value is $600,000. If the building has suffered 15% physical deterioration and 8% functional obsolescence, what is the depreciated cost of the improvements?
A building's gross rent multiplier (GRM) is 120. If the monthly rent is $2,500, what is the indicated value?
In the cost approach, economic obsolescence is characterized as:
The concept of regression in property values means that:
A commercial property has potential gross income of $120,000, vacancy and collection loss of 8%, and operating expenses of $35,000. Using a cap rate of 9.5%, what is the indicated value?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Related Tools
Previous Question
Using the band of investment technique, calculate the overall cap rate given: 70% debt at 5.5% interest rate, 30% equity requiring 12% return.
Next Question
A property sold for $400,000 six months ago. Market conditions have improved by 2% per quarter. What is the time-adjusted sale price for current market conditions?