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
B) $357,000
Why this is correct: Net adjustment = +5% (location) - 3% (condition) = +2%. Adjusted sale price = $350,000 × 1.02 = $357,000. Alternatively: $350,000 + ($350,000 × 0.05) - ($350,000 × 0.03) = $357,000. Why the other choices are wrong: $350,000 ignores the adjustments. $343,000 results from subtracting both adjustments (net -8%). $378,000 results from adding both adjustments (net +8%). Exam tip: Calculate net percentage adjustment first, then apply to sale price.
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
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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