A comparable has two garage bays and the subject three. Relevant market evidence supports an $8,000 marginal contribution for this additional bay. What signed adjustment applies to the comparable?
Correct Answer
B) $8,000
(3 − 2) × 8000 = +8000. Common errors: deducting for the comparable’s two bays gives −$16,000; counting the comparable’s two bays gives $16,000; counting the subject’s three bays gives $24,000.
Why This Is the Correct Answer
Option B is correct because the subject has one more bay than the comparable, and the market supports $8,000 for that additional bay. The adjustment is (3 − 2) × $8,000 = +$8,000, upward because the comparable is inferior.
Why the Other Options Are Wrong
Option A: −$16,000
Option A, −$16,000, deducts for the comparable's two bays: −2 × $8,000 = −$16,000. The comparable is inferior, so it is adjusted upward, and only the one-bay difference counts: (3 − 2) × $8,000 = +$8,000.
Option C: $16,000
Option C, $16,000, comes from 2 × $8,000, counting the comparable's two bays. Only the one-bay difference is adjusted: (3 − 2) × $8,000 = $8,000.
Option D: $24,000
Option D, $24,000, comes from 3 × $8,000, counting all of the subject's bays. Only the difference of one bay is adjusted, giving $8,000.
CIA: Comparable Inferior, Add
When the Comparable is Inferior to the subject, Add to the comparable's price; when it is superior, subtract.
How to use: Use this when deciding the sign of an adjustment to a comparable.
Exam Tip
Adjust only for the difference between the subject and the comparable, not for the total quantity of the feature.
Common Mistakes to Avoid
- -Adjusting the comparable in the wrong direction
- -Multiplying by the total number of bays instead of the difference
- -Adjusting the subject instead of the comparable
Concept Deep Dive
Analysis
This question tests the direction and amount of an adjustment for a garage bay difference. Adjustments are made to the comparable, so when the comparable lacks a feature the subject has, it is adjusted upward by the market-supported contribution of the difference.
Background Knowledge
Adjustments are applied to the comparable to make it resemble the subject. If the comparable is inferior in a feature, its price is adjusted up; if superior, down. The amount reflects the market's contribution for the difference, which can be supported by paired sales, statistical analysis or other methods.
Real-World Application
An appraiser values a home with a three-car garage using a comparable with a two-car garage. Paired sales in the neighborhood support about $8,000 for an additional bay, so the appraiser adds $8,000 to the comparable's sale price.
More Sales Comparison Questions
An undamaged but functionally inadequate system causes a supported $60,000 loss. Replacement costs $85,000 and restores only $60,000, with no other benefits. What loss classification and deduction fit?
The subject is a 10-year-old dwelling with improvement cost new of $640,000. A highly comparable 7-year-old dwelling recently sold for $580,000; at the sale date its site was worth $150,000 and its improvement cost new was $500,000. Market evidence shows depreciation accruing evenly with actual age. What is the depreciated value of the subject improvements?
Observed sale prices are $450,000, $475,000, $425,000, $500,000, $440,000. Calculate the range (maximum−minimum), to the nearest dollar.
Observed values are 100, 105, 110, 115, 120. Calculate the range (maximum−minimum).
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