A comparable property sold for $400,000. The subject property has a garage worth $15,000 that the comparable lacks. The subject also lacks a fireplace worth $8,000 that the comparable has. What is the adjusted sale price of the comparable?
Correct Answer
D) $407,000
Why this is correct: adjustments make the comparable resemble the subject. The comparable lacks a garage the subject has, so it is inferior in that respect and the $15,000 is added to it; the comparable has a fireplace the subject lacks, so it is superior there and the $8,000 is deducted. Calculation: $400,000 + $15,000 - $8,000 = $407,000. Why the other choices are wrong: $377,000 deducts both, which is what inverting the direction rule produces — a feature the comparable does not have cannot make it worth more; $423,000 adds both; $393,000 inverts both adjustments, deducting for the garage and adding for the fireplace. Exam tip: make the comparable resemble the subject. Where the subject has a feature the comparable lacks, ADD its value to the comparable.
Why This Is the Correct Answer
Option A ($377,000) correctly applies the adjustment principle by subtracting both the garage value ($15,000) and fireplace value ($8,000) from the comparable's sale price of $400,000. Since the comparable lacks the garage that the subject has, we subtract $15,000 to account for the comparable's inferiority. Since the subject lacks the fireplace that the comparable has, we subtract $8,000 to account for the comparable's superiority. The calculation is: $400,000 - $15,000 - $8,000 = $377,000.
Why the Other Options Are Wrong
Option B: $423,000
Option B ($423,000) incorrectly adds both adjustments to the comparable's sale price ($400,000 + $15,000 + $8,000 = $423,000). This fundamental error misunderstands the direction of adjustments and would significantly overstate the subject property's value.
Option C: $393,000
Option C ($393,000) incorrectly subtracts the garage value and adds the fireplace value ($400,000 - $15,000 + $8,000 = $393,000). This reverses the proper adjustment direction and demonstrates confusion about how to handle feature differences.
The SUBTRACT EVERYTHING Rule
Remember: 'When adjusting comparables, SUBTRACT features the comparable has that subject lacks, and SUBTRACT features the subject has that comparable lacks.' Think of it as 'Comparable loses points for being different in ANY way.'
How to use: When you see adjustment questions, immediately identify what each property has/lacks, then subtract BOTH feature values from the comparable's sale price regardless of which property has the feature.
Exam Tip
Always double-check your adjustment direction by asking: 'Am I adjusting the comparable TO match the subject?' If yes, subtract any feature differences from the comparable's price.
Common Mistakes to Avoid
- -Adding adjustments instead of subtracting them
- -Confusing which direction to adjust based on which property has the feature
- -Forgetting that ALL adjustments are made TO the comparable, not to the subject
Concept Deep Dive
Analysis
This question tests the fundamental concept of comparable sales adjustments in the sales comparison approach to real estate appraisal. The key principle is that adjustments are always made TO the comparable property to make it more similar TO the subject property. When the comparable has a feature the subject lacks, you subtract that feature's value from the comparable's sale price. When the subject has a feature the comparable lacks, you also subtract that feature's value from the comparable's sale price (because the comparable is inferior without that feature).
Background Knowledge
The sales comparison approach requires adjusting comparable sales to account for differences between the comparable and subject properties. All adjustments are made TO the comparable property to make it more like the subject property, with the goal of estimating what the comparable would have sold for if it were identical to the subject.
Real-World Application
In practice, appraisers use this adjustment method to analyze multiple comparable sales, making each comparable 'equivalent' to the subject property to determine a reliable value range for the property being appraised.
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