A comparable property sold for $425,000 but has a pool valued at $25,000 that the subject property lacks. The comparable also lacks central air conditioning valued at $8,000 that the subject has. What is the adjusted sale price?
Correct Answer
C) $408,000
Why this is correct: Adjust the comparable to the subject: Start with the comparable's sale price ($425,000). Subtract the value of its superior pool ($25,000) because the subject lacks it. Add the value of the subject's superior central air ($8,000) because the comparable lacks it. $425,000 - $25,000 + $8,000 = $408,000. Why the other choices are wrong: "$458,000" incorrectly adds both adjustments. "$442,000" results from subtracting only $8,000. "$400,000" results from subtracting both amounts. Exam tip: Always adjust the comparable to the subject: subtract for superior features in the comp, add for superior features in the subject.
Why This Is the Correct Answer
Option A ($408,000) correctly applies the adjustment methodology by starting with the comparable's sale price of $425,000 and making two adjustments. First, $25,000 is subtracted because the comparable has a pool that the subject lacks, meaning the comparable sold for more due to this extra feature. Second, $8,000 is added because the subject has central air conditioning that the comparable lacks, meaning the comparable would have sold for more if it had this feature. The calculation is: $425,000 - $25,000 + $8,000 = $408,000.
Why the Other Options Are Wrong
Option A: $458,000
Option A ($458,000) incorrectly adds both the pool value and air conditioning value to the sale price ($425,000 + $25,000 + $8,000), failing to recognize that the pool should be subtracted since it's a feature the comparable has that the subject lacks.
Option B: $442,000
Option B ($442,000) incorrectly adds both adjustments instead of subtracting the pool value, resulting in $425,000 + $25,000 + $8,000 = $458,000, then somehow arriving at $442,000, showing a fundamental misunderstanding of adjustment direction.
Option D: $400,000
Option D ($400,000) incorrectly subtracts both adjustments from the sale price ($425,000 - $25,000 - $8,000), failing to recognize that the air conditioning value should be added since it's a feature the subject has that the comparable lacks.
CAS Method (Comparable Adjustment Strategy)
Remember 'CAS': Comparable has it, Subject doesn't = Subtract; Comparable lacks it, Subject has it = Add. Think 'C-A-S' where the middle 'A' represents the adjustment direction.
How to use: When you see an adjustment question, identify each feature difference and ask: 'Does the Comparable have it and Subject doesn't?' (Subtract) or 'Does the Subject have it and Comparable doesn't?' (Add). Apply CAS to each feature systematically.
Exam Tip
Always start by clearly identifying what the comparable has that the subject doesn't (subtract these) and what the subject has that the comparable doesn't (add these). Write out the calculation step by step to avoid sign errors.
Common Mistakes to Avoid
- -Adding when you should subtract (or vice versa) due to confusion about adjustment direction
- -Forgetting to make an adjustment for a significant difference between properties
- -Using incorrect adjustment amounts that don't reflect true market value differences
Concept Deep Dive
Analysis
This question tests the fundamental concept of adjustments in the sales comparison approach, which is one of the three primary valuation methods in 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 a comparable has a feature the subject lacks, you subtract that feature's value from the comparable's sale price. Conversely, when the subject has a feature the comparable lacks, you add that feature's value to the comparable's sale price. This process helps create an adjusted sale price that better reflects what the subject property would sell for in the current market.
Background Knowledge
The sales comparison approach requires adjusting comparable sales to account for differences between the comparable and subject properties. Adjustments are always made to the comparable property to make it more like the subject property, following the principle that if the comparable is superior in some aspect, you subtract value, and if the comparable is inferior, you add value.
Real-World Application
In practice, appraisers make numerous adjustments for differences in location, size, condition, amenities, and market conditions. Each adjustment requires careful analysis of how much value each feature contributes to the property's market value, often supported by paired sales analysis or cost data.
More Sales Comparison Questions
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