A comparable sale requires a +$15,000 adjustment for location and a -$8,000 adjustment for condition. If the comparable sold for $325,000, what is the adjusted sale price?
Correct Answer
A) $332,000
The adjusted sale price is calculated by applying all adjustments to the original sale price. $325,000 + $15,000 - $8,000 = $332,000.
Why This Is the Correct Answer
Option A ($332,000) correctly applies both adjustments to the original sale price using proper mathematical order. The calculation starts with the sale price of $325,000, adds the positive location adjustment of $15,000 (indicating the comparable has an inferior location), and subtracts the negative condition adjustment of $8,000 (indicating the comparable has superior condition). This results in $325,000 + $15,000 - $8,000 = $332,000.
Why the Other Options Are Wrong
Option B: $318,000
This answer ($318,000) incorrectly subtracts both adjustments from the sale price, treating both as negative adjustments. The calculation would be $325,000 - $15,000 - $8,000 = $302,000, which doesn't even match this option, suggesting multiple calculation errors.
Option C: $340,000
This answer ($340,000) incorrectly adds both adjustments to the sale price, treating both as positive adjustments. The calculation would be $325,000 + $15,000 + $8,000 = $348,000, which doesn't match this option exactly, indicating a fundamental misunderstanding of adjustment signs.
Option D: $310,000
This answer ($310,000) appears to result from incorrectly applying the adjustments, possibly by subtracting the location adjustment and adding the condition adjustment, yielding $325,000 - $15,000 + $8,000 = $318,000, which still doesn't match this option.
PLUS-MINUS Rule
Remember 'PLUS for Poor, MINUS for More': Add money (+) when the comparable is Poor/inferior in a feature, subtract money (-) when the comparable has More/superior features than the subject.
How to use: When you see adjustment amounts with + or - signs, apply them exactly as written to the sale price. Don't overthink the direction - the sign tells you everything you need to know.
Exam Tip
Always write out the full calculation: Sale Price + Positive Adjustments - Negative Adjustments. Double-check your arithmetic and ensure you're applying the signs correctly as given in the problem.
Common Mistakes to Avoid
- -Reversing the signs of adjustments
- -Adding all adjustments regardless of sign
- -Subtracting all adjustments regardless of sign
Concept Deep Dive
Analysis
This question tests the fundamental concept of comparable sales adjustments in the sales comparison approach to valuation. When using comparable sales, appraisers must adjust each comparable property to account for differences between it and the subject property. Positive adjustments are made when the comparable is inferior to the subject property in a particular feature, while negative adjustments are made when the comparable is superior. The goal is to determine what the comparable would have sold for if it had been identical to the subject property.
Background Knowledge
The sales comparison approach requires adjustments to comparable sales to account for differences between the comparable and subject properties. Positive adjustments indicate the comparable is inferior in that aspect, while negative adjustments indicate the comparable is superior.
Real-World Application
An appraiser comparing a subject property to a comparable that sold in a less desirable neighborhood (requiring a positive location adjustment) but in better condition (requiring a negative condition adjustment) would make these exact adjustments to estimate market value.
More Math & Stats Questions
What is the area of a triangular lot with a base of 120 feet and a height of 80 feet?
An irregular lot has the following measurements: Side A = 100', Side B = 150', Side C = 120', Side D = 180'. If the lot can be divided into two rectangles (100' × 150' and 120' × 30'), what is the total area?
A property has a potential gross income of $180,000, vacancy and collection loss of 7%, and operating expenses of $65,000. What is the NOI?
A property generates $120,000 in net operating income and is valued at $1,500,000. What is the capitalization rate?
A building has potential gross income of $180,000, vacancy and collection loss of 8%, and operating expenses of $54,000. What is the net operating income?
People Also Study
Valuation Principles & Procedures
25% of exam
Property Description & Analysis
20% of exam
Market Analysis & Highest/Best Use
15% of exam
USPAP (Ethics & Standards)
15% of exam
Report Writing & Compliance
10% of exam
Related Tools
Previous Question
A property has net operating income of $85,000 and annual debt service of $68,000. What is the debt coverage ratio?
Next Question
A property has potential gross income of $120,000, vacancy and collection losses of 8%, and operating expenses of $35,000. What is the net operating income?