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
A) Subtract $8,000
Why this is correct: In sales comparison, adjustments are made to the comparable to make it equivalent to the subject. If the comparable has a superior feature (garage) worth $8,000, you subtract that value from the comparable's sale price to estimate what it would have sold for without the garage, like the subject. Why the other choices are wrong: 'No adjustment needed' would invalidate the comparison. 'Add $8,000' would make the comparable appear even more superior. 'Add $4,000' is an arbitrary half-adjustment with no basis. Exam tip: Adjust the comparable to the subject. Subtract for superior features in the comp; add for inferior features in the comp.
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
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.
More Sales Comparison Questions
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The following sale prices were recorded: $245,000, $250,000, $250,000, $255,000, $280,000. What is the mode?
A property has a replacement cost of $1,800,000. Physical deterioration is estimated at $200,000, functional obsolescence at $150,000, and external obsolescence at $100,000. What is the depreciated value using the breakdown method?
What is the present value of $150,000 to be received in 5 years, assuming a discount rate of 8%?
A triangular lot has a base of 100 feet and a height of 80 feet. What is the area in square feet?
An irregular lot can be divided into a rectangle (100' × 80') and a triangle (base 60', height 40'). What is the total area in acres?
A property has a net operating income of $85,000 and annual debt service of $68,000. What is the debt coverage ratio?
A warehouse has interior dimensions of 120 feet × 80 feet × 20 feet high. What is the volume in cubic feet?
A property is purchased for $500,000 with a loan of $400,000. What is the loan-to-value ratio?
A property sold for $400,000 with annual gross rent of $40,000. What is the gross rent multiplier?
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