A comparable sale has a garage worth $8,000, but the subject property does not have a garage. What adjustment should be made to the comparable sale?
Correct Answer
B) Subtract $8,000
When the comparable is superior to the subject (has a garage), subtract the value of that feature from the comparable's sale price to make it more similar to the subject.
Why This Is the Correct Answer
Option B is correct because the comparable property is superior to the subject property (it has a garage worth $8,000 while the subject has no garage). To make the comparable more similar to the subject, we must subtract the $8,000 value of the garage from the comparable's sale price. This adjustment removes the value advantage that the comparable had over the subject property. The adjusted price will then better reflect what the comparable would have sold for without the garage, making it a more accurate indicator of the subject's value.
Why the Other Options Are Wrong
Option A: Add $8,000
Adding $8,000 would be incorrect because it would make the comparable appear even more valuable relative to the subject property, which goes against the goal of making them similar. This would overstate the subject's value.
Option C: No adjustment needed
No adjustment would be inappropriate because there is a significant difference between the properties (presence vs. absence of a garage worth $8,000). Ignoring this difference would lead to an inaccurate valuation of the subject property.
Option D: Add $4,000
Adding $4,000 is wrong for two reasons: first, any addition would be incorrect since we should subtract when the comparable is superior; second, the amount should be the full $8,000 value of the garage, not half.
CBS Rule
CBS: Comparable Better, Subtract. When the Comparable is Better than the subject, Subtract the value of the superior feature.
How to use: When you see an adjustment question, first identify which property is better for the specific feature, then apply CBS - if the comparable is better, subtract the difference.
Exam Tip
Always identify the direction of the adjustment first by asking 'Which property is superior for this feature?' Then remember that adjustments are always made TO the comparable, never to the subject.
Common Mistakes to Avoid
- -Confusing the direction of adjustment and adding instead of subtracting
- -Making adjustments to the subject property instead of the comparable
- -Using partial values instead of the full feature value for adjustments
Concept Deep Dive
Analysis
This question tests the fundamental principle of sales comparison adjustments in real estate appraisal. The sales comparison approach requires adjustments to make comparable properties as similar as possible to the subject property. When a comparable property has a feature that the subject lacks, the appraiser must subtract the value of that superior feature from the comparable's sale price. This adjustment process ensures that the final adjusted sale prices of comparables reflect what they would have sold for if they were identical to the subject property.
Background Knowledge
The sales comparison approach requires adjustments to account for differences between comparable sales and the subject property. The fundamental rule is: if the comparable is superior to the subject, subtract the value of the superior feature; if the comparable is inferior to the subject, add the value of the missing feature.
Real-World Application
In practice, appraisers regularly encounter this situation when comparable sales have features like garages, pools, or upgraded kitchens that the subject property lacks. These adjustments are crucial for accurate market value estimates and are scrutinized by lenders and review appraisers.
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