A comparable property sold for $320,000. It has a pool worth $15,000 that the subject property lacks, but the subject has a garage worth $20,000 that the comparable lacks. What is the adjusted sale price of the comparable?
Correct Answer
D) $325,000
Why this is correct: Adjust the comparable sale to the subject property. Subtract the value of the comparable's superior feature (pool: $15,000) and add the value of the subject's superior feature (garage: $20,000). $320,000 - $15,000 + $20,000 = $325,000. Why the other choices are wrong: "$355,000" adds both adjustments ($320,000 + $15,000 + $20,000). "$305,000" subtracts both ($320,000 - $15,000 - $20,000). "$315,000" only subtracts the pool ($320,000 - $15,000) and ignores the garage. Exam tip: When adjusting comparables, subtract for features the comparable has that the subject lacks, and add for features the subject has that the comparable lacks.
Why This Is the Correct Answer
Option C ($325,000) correctly applies the adjustment methodology. Since the comparable has a pool worth $15,000 that the subject lacks, we subtract $15,000 from the comparable's sale price because the comparable is superior in this aspect. Since the subject has a garage worth $20,000 that the comparable lacks, we add $20,000 to the comparable's sale price because the comparable is inferior in this aspect. The calculation is: $320,000 - $15,000 + $20,000 = $325,000.
Why the Other Options Are Wrong
Option A: $355,000
This answer ($355,000) incorrectly adds both adjustments to the sale price, resulting in $320,000 + $15,000 + $20,000 = $355,000, which reverses the proper adjustment methodology.
Option B: $305,000
This answer ($305,000) incorrectly subtracts both adjustments from the sale price, resulting in $320,000 - $15,000 - $20,000 = $285,000, which doesn't match this option, or represents a different calculation error.
Option C: $315,000
This answer ($315,000) results from only making the downward adjustment for the pool ($320,000 - $15,000 = $305,000) and failing to make the upward adjustment for the garage, or from making calculation errors.
CATS Method
CATS = Comparable Adjustments To Subject. Remember: 'Comparable is Superior = Subtract' and 'Comparable is Inferior = Add.' Think of a cat looking down (subtract when comparable is superior) or looking up (add when comparable is inferior).
How to use: When you see adjustment questions, identify each feature difference, determine if the comparable is superior or inferior to the subject for that feature, then apply CATS: subtract for superior comparable features, add for inferior comparable features.
Exam Tip
Always double-check your adjustment direction by asking: 'Is the comparable better or worse than the subject for this feature?' Write out the calculation step-by-step to avoid sign errors.
Common Mistakes to Avoid
- -Reversing the adjustment direction (adding when should subtract)
- -Making adjustments to the subject instead of the comparable
- -Forgetting to make adjustments for all identified differences
Concept Deep Dive
Analysis
This question tests the fundamental concept of sales comparison adjustments in real estate appraisal. When using comparable sales, appraisers must adjust the sale prices of comparables to account for differences between the comparable and subject property. The key principle is that adjustments are always made TO the comparable, not the subject. If the comparable is superior to the subject in some feature, you subtract the value of that feature from the comparable's sale price. If the comparable is inferior to the subject, you add the value of the missing feature to the comparable's sale price.
Background Knowledge
Sales comparison adjustments are made to comparable properties to account for differences with the subject property. The fundamental rule is that all adjustments are made TO the comparable sale price, never to the subject property. When the comparable is superior to the subject, subtract the value difference; when the comparable is inferior to the subject, add the value difference.
Real-World Application
In practice, appraisers use this adjustment process for all property differences including square footage, lot size, condition, amenities, and location factors. Accurate adjustments are crucial for determining market value and supporting lending decisions.
More Sales Comparison Questions
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