A comparable property sold for $350,000 but required a 5% upward adjustment for location and a 3% downward adjustment for condition. What is the adjusted sale price?
Correct Answer
A) $357,000
Net adjustment = +5% - 3% = +2%. Adjusted price = $350,000 × 1.02 = $357,000. Alternatively: $350,000 + $17,500 - $10,500 = $357,000.
Why This Is the Correct Answer
Option A is correct because it properly calculates the net adjustment by combining the positive and negative adjustments algebraically. The +5% location adjustment and -3% condition adjustment result in a net +2% adjustment. Applying this to the original sale price: $350,000 × 1.02 = $357,000. This can also be calculated by finding the dollar amounts: +$17,500 for location and -$10,500 for condition, resulting in a net increase of $7,000.
Why the Other Options Are Wrong
Option B: $350,000
Option B is wrong because it shows no adjustment to the original sale price, ignoring both the location and condition adjustments that need to be applied to make the comparable more similar to the subject property.
Option C: $343,000
Option C is wrong because it appears to apply only the negative 3% condition adjustment ($350,000 × 0.97 = $339,500, close to $343,000) while ignoring the positive 5% location adjustment, resulting in an incomplete calculation.
Option D: $378,000
Option D is wrong because it appears to add both adjustments as positive values (5% + 3% = 8%), resulting in $350,000 × 1.08 = $378,000, which fails to recognize that one adjustment is negative and should be subtracted.
PLUS-MINUS Method
Remember 'PLUS for Poor, MINUS for More': When the comparable is Poor/inferior in a feature, add (PLUS). When the comparable has More/superior features, subtract (MINUS). Then combine all adjustments algebraically.
How to use: When you see adjustment percentages, immediately identify each as + or - based on whether the comparable is inferior or superior to the subject, then calculate the net adjustment before applying to the sale price.
Exam Tip
Always double-check your adjustment direction - upward adjustments increase the sale price, downward adjustments decrease it. Calculate net adjustment first, then apply to the original price in one step to avoid errors.
Common Mistakes to Avoid
- -Adding both adjustments as positive values instead of netting them
- -Applying adjustments sequentially instead of calculating net adjustment first
- -Confusing adjustment direction (when to add vs. subtract)
Concept Deep Dive
Analysis
This question tests the fundamental concept of comparable sales adjustments in the sales comparison approach to valuation. When using comparable properties to estimate the value of a subject property, appraisers must adjust the sale prices of comparables to account for differences between the comparable and subject properties. Adjustments can be positive (upward) when the comparable is inferior to the subject, or negative (downward) when the comparable is superior to the subject. The net effect of all adjustments determines the final adjusted sale price that better reflects what the comparable would have sold for if it had the same characteristics as the subject property.
Background Knowledge
The sales comparison approach requires adjusting comparable sale prices to account for differences between the comparable and subject properties. Adjustments are made upward when the comparable is inferior to the subject and downward when the comparable is superior to the subject.
Real-World Application
In practice, appraisers make numerous adjustments for factors like location, condition, size, age, and features. Each adjustment reflects market data showing how much buyers pay more or less for specific differences between properties.
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