A comparable property sold for $450,000 and has a swimming pool valued at $15,000 that the subject property lacks. What adjustment should be made to the comparable?
Correct Answer
B) Subtract $15,000 from the comparable's sale price
When the comparable has a superior feature that the subject lacks, you subtract the value of that feature from the comparable's sale price to make it equivalent to the subject property.
Why This Is the Correct Answer
Option B is correct because when the comparable has a superior feature (swimming pool worth $15,000) that the subject property lacks, we must subtract that value from the comparable's sale price. This adjustment makes the comparable equivalent to the subject property by removing the value of the feature the subject doesn't have. The logic is that if the comparable didn't have the pool, it would have sold for $15,000 less, making it more directly comparable to the subject property.
Why the Other Options Are Wrong
Option A: Add $15,000 to the comparable's sale price
Adding $15,000 to the comparable's sale price would be incorrect because it would make the comparable even more superior to the subject property. This would increase the difference rather than eliminate it, leading to an overvaluation of the subject property.
Option C: Add $15,000 to the subject property value
Adjustments are always made to the comparable properties, never to the subject property. The subject property serves as the baseline, and comparables are adjusted to match the subject's characteristics. Adding value to the subject property would violate fundamental appraisal methodology.
Option D: No adjustment is necessary
An adjustment is absolutely necessary because there is a significant difference ($15,000 swimming pool) between the comparable and subject properties. Ignoring this difference would result in an inaccurate valuation and violate appraisal standards requiring adjustment for material differences.
The CBS Rule
CBS = Comparable Better, Subtract. When the Comparable is Better than the subject (has superior features), you Subtract the value of those features from the comparable's sale price.
How to use: When you see a question about adjustments, immediately identify which property has the superior feature. If it's the comparable, use CBS - subtract the feature's value from the comparable's price.
Exam Tip
Always remember that adjustments flow TO the comparables, never to the subject property. The subject is your baseline - you're adjusting the comparables to match the subject.
Common Mistakes to Avoid
- -Adjusting the subject property instead of the comparable
- -Adding value when you should subtract (or vice versa)
- -Forgetting to make adjustments when material differences exist
Concept Deep Dive
Analysis
This question tests the fundamental principle of comparative market analysis adjustments in real estate appraisal. The sales comparison approach requires making adjustments to comparable properties to account for differences between them and the subject property. When a comparable property has a superior feature that the subject property lacks, the appraiser must adjust the comparable's sale price downward to reflect what it would have sold for without that feature. This process ensures that all comparables are adjusted to be as similar as possible to the subject property for accurate valuation.
Background Knowledge
The sales comparison approach requires adjusting comparable sales to account for differences with the subject property. All adjustments are made to the comparables, never to the subject property, which serves as the baseline for comparison.
Real-World Application
In practice, appraisers regularly encounter situations where comparables have features like pools, upgraded kitchens, or additional bathrooms that the subject lacks. They must research the contributory value of these features in the local market and subtract these amounts from the comparable sales prices to arrive at accurate adjusted sale prices for their analysis.
More Valuation Principles Questions
Which of the following best describes the bundle of rights theory in real estate?
Market value is best defined as:
The principle of substitution states that:
A comparable sale occurred 8 months ago for $450,000. Market conditions analysis shows property values have increased 0.5% per month. What is the adjusted sale price?
What is the difference between reproduction cost and replacement cost?
People Also Study
Property Description & Analysis
20% of exam
Market Analysis & Highest/Best Use
15% of exam
Appraisal Math & Statistics
15% of exam
USPAP (Ethics & Standards)
15% of exam
Report Writing & Compliance
10% of exam