A comparable sale requires a +$20,000 adjustment for location and a -$15,000 adjustment for condition. If the comparable sold for $350,000, what is the adjusted sale price?
Correct Answer
D) $355,000
Why this is correct: Adjusted price = Sale Price + Sum of Adjustments. Here, $350,000 + (+$20,000) + (-$15,000) = $355,000. Why the other choices are wrong: "$385,000" is wrong, likely from adding both adjustments. "$315,000" is wrong, likely from subtracting both adjustments. "$345,000" is wrong, likely from only applying the -$15,000 adjustment. Exam tip: Add positive adjustments and subtract negative adjustments to the sale price.
Why This Is the Correct Answer
Option A ($355,000) is correct because it properly applies the adjustment formula: Sale Price + Total Net Adjustment. The comparable sold for $350,000, requires a +$20,000 adjustment for location (comparable is inferior) and a -$15,000 adjustment for condition (comparable is superior). The calculation is $350,000 + $20,000 - $15,000 = $355,000. This represents what the comparable would have sold for if it had the same location and condition as the subject property.
Why the Other Options Are Wrong
Option A: $385,000
Option A ($385,000) incorrectly adds both adjustments to the sale price ($350,000 + $20,000 + $15,000 = $385,000), failing to recognize that the condition adjustment should be negative because the comparable is superior to the subject in condition.
Option B: $315,000
Option B ($315,000) incorrectly subtracts both adjustments from the sale price ($350,000 - $20,000 - $15,000 = $315,000), treating both adjustments as negative when one should be positive and one should be negative.
Option C: $345,000
Option C ($345,000) incorrectly subtracts both adjustments from the sale price ($350,000 - $20,000 + $15,000 = $345,000), failing to recognize that the location adjustment should be positive because the comparable is inferior to the subject in location.
COMPASS Method
C-O-M-P-A-S-S: Comparable price + Overcoming deficiencies - Minimizing superiorities = Perfect Adjusted Sale price for Subject. Remember: Add money to fix what's worse, subtract money for what's better than the subject.
How to use: When you see adjustment problems, identify each adjustment as either fixing a deficiency (add) or accounting for superiority (subtract) compared to the subject property, then apply the COMPASS method to calculate the final adjusted price.
Exam Tip
Always double-check the signs of your adjustments - positive adjustments mean the comparable is inferior to the subject, negative adjustments mean the comparable is superior to the subject.
Common Mistakes to Avoid
- -Confusing the direction of adjustments (adding when should subtract)
- -Applying both adjustments in the same direction
- -Forgetting to net the positive and negative adjustments together
Concept Deep Dive
Analysis
This question tests the fundamental concept of making adjustments to comparable sales in the sales comparison approach to appraisal. When using comparable sales, appraisers must adjust the sale prices of comparables to account for differences between the comparable property and the subject property. Positive adjustments are made when the comparable is inferior to the subject in a particular characteristic, while negative adjustments are made when the comparable is superior to the subject. The goal is to determine what the comparable would have sold for if it had been identical to the subject property.
Background Knowledge
In the sales comparison approach, adjustments are made to comparable sales to account for differences between the comparable and subject property. The direction of adjustment depends on whether the comparable is superior (+adjustment needed) or inferior (-adjustment needed) to the subject property in each characteristic.
Real-World Application
An appraiser comparing a subject property to a comparable sale that has a better location (+$20,000 value) but worse condition (-$15,000 value) would adjust the comparable's sale price upward for location and downward for condition to estimate what it would have sold for if identical to the subject.
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