A comparable has only two signed adjustments, +$14,000 and −$9,000. What are the net and gross dollar adjustments?
Correct Answer
A) Net +$5,000; gross $23,000
Net = 14000 − 9000 = 5000; gross = |14000| + |−9000| = 23000. Common errors: swapping net and gross gives Net +$23,000; gross $5,000; reversing the sign of the net adjustment gives Net −$5,000; gross $23,000; computing gross the same way as net gives Net +$5,000; gross $5,000.
Why This Is the Correct Answer
Option A is correct because the net adjustment is +$14,000 plus −$9,000, which equals +$5,000. The gross adjustment ignores signs: $14,000 + $9,000 = $23,000. These two figures measure different things, so they should not be equal here.
Why the Other Options Are Wrong
Option B: Net +$23,000; gross $5,000
Option B shows net +$23,000 and gross $5,000, which swaps the two results. The correct net is 14,000 − 9,000 = +$5,000 and the correct gross is 14,000 + 9,000 = $23,000.
Option C: Net −$5,000; gross $23,000
Option C shows net −$5,000, which reverses the sign of the net adjustment. Since the positive $14,000 is larger than the negative $9,000, the net is +$5,000; the gross of $23,000 is right but the net is not.
Option D: Net +$5,000; gross $5,000
Option D shows gross $5,000, which computes gross the same way as net by letting the signs offset. Gross uses absolute values, so it is $14,000 + $9,000 = $23,000, not $5,000.
Net nets out, gross grows
In net adjustment the pluses and minuses net out against each other; in gross adjustment each amount grows the total because signs are dropped.
How to use: Use this whenever a grid question asks for net and gross adjustment figures.
Exam Tip
Gross adjustment is at least as large as the absolute value of the net adjustment; if a choice shows gross smaller than net, it has the two confused.
Common Mistakes to Avoid
- -Swapping the net and gross results
- -Letting signs offset when computing gross adjustment
- -Dropping the sign of the net adjustment
Concept Deep Dive
Analysis
This question tests the difference between net and gross adjustments. Net adjustment adds the signed amounts so offsets cancel, while gross adjustment adds the absolute values so each difference counts. Compute each separately and keep the sign of the net result.
Background Knowledge
The Fannie Mae Form 1004 sales grid reports both a net adjustment total and net and gross adjustment percentages. Net adjustment shows the overall direction and size of the change to the comparable's price. Gross adjustment shows how much total adjusting was needed, which is a better signal of how similar the comparable is.
Real-World Application
A comparable needs +$14,000 for a larger living area and −$9,000 for a better view. On the grid the appraiser reports a net adjustment of +$5,000, but a reviewer also looks at the $23,000 gross figure to judge how different the comparable is from the subject.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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When an appraiser combines total-price and unit-of-comparison adjustments, which adjustments are made to the total sale price before conversion to a unit price?
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