A comparable property sold for $450,000. The subject property is 200 sq ft larger, and market data indicates $75 per sq ft for size differences. What is the adjusted sale price for size?
Correct Answer
A) $435,000
Why this is correct: The subject is superior (larger), so the comparable's price must be adjusted downward to make it equivalent. Adjustment = 200 sq ft × $75/sq ft = $15,000. Adjusted price = $450,000 - $15,000 = $435,000. Why the other choices are wrong: $600,000 results from adding $150,000 (200 × $75) incorrectly. $465,000 adds $15,000 instead of subtracting it. $450,000 makes no adjustment. Exam tip: Remember the rule: If the subject is better, subtract from the comp; if the comp is better, add to the comp.
Why This Is the Correct Answer
Option A is correct because it properly applies the adjustment principle. Since the subject property is 200 sq ft larger than the comparable, we must adjust the comparable downward to reflect what it would have sold for with the additional square footage. The calculation is: 200 sq ft × $75/sq ft = $15,000 adjustment. Since we're adjusting downward, we subtract: $450,000 - $15,000 = $435,000. This represents the adjusted sale price that accounts for the size difference.
Why the Other Options Are Wrong
The COMPASS Rule
COMPASS: Comparable Opposite Movement - Plus Adjustments Subtract, Subtract adjustments Plus. When the subject has MORE of something good, SUBTRACT from the comparable. When the subject has LESS of something good, ADD to the comparable.
How to use: When you see an adjustment question, first identify which property (subject or comparable) has more of the feature. Then apply COMPASS: if subject has more, subtract from comparable; if subject has less, add to comparable.
Exam Tip
Always double-check the direction of your adjustment by asking: 'If the comparable had this feature, would it have sold for more or less?' Then adjust accordingly.
Common Mistakes to Avoid
- -Adding the adjustment when you should subtract (or vice versa)
- -Making the adjustment to the subject property instead of the comparable
- -Forgetting to make any adjustment when there are clear differences between properties
Concept Deep Dive
Analysis
This question tests the fundamental principle of comparable sales adjustments in real estate appraisal. When using the sales comparison approach, appraisers must adjust comparable properties to match the subject property's characteristics. The key concept is that adjustments are always made TO the comparable property, not the subject property. When the subject property has more of a desirable feature (like square footage), the comparable's sale price must be adjusted downward to reflect what it would have sold for if it had the same superior characteristic as the subject.
Background Knowledge
In the sales comparison approach, adjustments are made TO comparable properties to make them equivalent to the subject property. The direction of adjustment is opposite to the difference: if the subject is superior in some aspect, adjust the comparable upward; if the subject is inferior, adjust the comparable downward.
Real-World Application
In practice, appraisers constantly make these adjustments when analyzing comparable sales. For example, if appraising a 2,000 sq ft home and using a 1,800 sq ft comparable that sold for $300,000, you'd adjust the comparable upward to reflect what it would have sold for with an additional 200 sq ft.
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