A comparable property sold for $450,000 six months ago. Market conditions have increased 2% since the sale. The comparable is superior to the subject by $15,000 in overall condition. What is the adjusted sale price?
Correct Answer
C) $444,000
Why this is correct: The adjustment sequence is: first, market conditions (time); second, other property differences. Step 1: Adjust the $450,000 sale price for a 2% increase. 450,000 * 1.02 = 459,000. Step 2: The comparable is superior to the subject by $15,000 in condition. To make the comparable equivalent to the subject, subtract $15,000 from the time-adjusted price: 459,000 - 15,000 = 444,000. Why the other choices are wrong: $474,000 incorrectly adds both adjustments (450,000 + 9,000 + 15,000). $450,000 applies no adjustments. $459,000 applies only the time adjustment and ignores the condition adjustment. Exam tip: Always apply time adjustments first. Then adjust for physical differences, remembering to subtract when the comp is superior.
Why This Is the Correct Answer
Option A is correct because it properly applies both required adjustments in the correct sequence. First, the time adjustment increases the sale price by 2% for market appreciation: $450,000 × 1.02 = $459,000. Then, because the comparable is superior to the subject by $15,000 in condition, we subtract this amount to adjust downward: $459,000 - $15,000 = $444,000. This represents what the comparable would have sold for if it had the same condition as the subject property.
Why the Other Options Are Wrong
TIME First, then SUBTRACT Superior
Remember 'TIME-SS': TIME adjustments first (percentage changes for market conditions), then SUBTRACT when comparable is Superior to Subject. If comparable is inferior, you would add the adjustment.
How to use: When you see a comparable adjustment problem, immediately identify: 1) TIME - apply percentage market change first, 2) SUPERIOR/INFERIOR - if comparable is superior, subtract the adjustment; if inferior, add it. Always do time adjustments before property adjustments.
Exam Tip
Always read carefully whether the comparable is 'superior' or 'inferior' to the subject - this determines whether you add or subtract the adjustment. Superior comparable = subtract adjustment; Inferior comparable = add adjustment.
Common Mistakes to Avoid
- -Applying adjustments in wrong order (property adjustments before time adjustments)
- -Adding adjustment when comparable is superior instead of subtracting
- -Forgetting to make the time adjustment for market conditions
Concept Deep Dive
Analysis
This question tests the fundamental appraisal concept of making adjustments to comparable sales to account for differences in time and property characteristics. The sales comparison approach requires appraisers to adjust comparable properties to make them equivalent to the subject property being appraised. Time adjustments account for market appreciation or depreciation between the sale date and the appraisal date. Property characteristic adjustments account for differences in condition, features, or other attributes between the comparable and subject properties.
Background Knowledge
In the sales comparison approach, appraisers must adjust comparable sales for differences in time (market conditions) and property characteristics to estimate what each comparable would sell for if it were identical to the subject property. Time adjustments are typically percentage-based and reflect market appreciation or depreciation, while property adjustments are dollar amounts reflecting specific differences in features, condition, or location.
Real-World Application
In practice, appraisers regularly encounter situations where comparable sales occurred months ago in changing markets and have different conditions than the subject property. For example, if appraising a home in fair condition and finding a comparable in excellent condition that sold 6 months ago during a rising market, both adjustments would be necessary to arrive at an accurate value indication.
More Sales Comparison Questions
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