A comparable sale requires the following adjustments: +$5,000 for location, -$3,000 for condition, +$2,000 for size. If the sale price was $285,000, what is the adjusted value?
Correct Answer
A) $289,000
Net adjustment = +$5,000 - $3,000 + $2,000 = +$4,000. Adjusted value = $285,000 + $4,000 = $289,000. Positive adjustments are made when the comparable is inferior to the subject, and negative adjustments when the comparable is superior.
Why This Is the Correct Answer
Option A is correct because it properly calculates the net adjustment by algebraically adding all individual adjustments: +$5,000 - $3,000 + $2,000 = +$4,000. This net positive adjustment of $4,000 is then added to the original sale price of $285,000 to arrive at the adjusted value of $289,000. The calculation follows the standard appraisal methodology where all adjustments are combined mathematically and applied to the comparable's sale price.
Why the Other Options Are Wrong
Option B: $281,000
Option B ($281,000) is incorrect because it appears to subtract the net adjustment from the sale price instead of adding it, or miscalculates the net adjustment as -$4,000 instead of +$4,000.
Option C: $295,000
Option C ($295,000) is incorrect because it adds $10,000 to the sale price, which would result from adding all adjustments as positive values ($5,000 + $3,000 + $2,000) while ignoring the negative sign on the condition adjustment.
Option D: $275,000
Option D ($275,000) is incorrect because it subtracts $10,000 from the sale price, which would result from treating all adjustments as negative values or making fundamental errors in the adjustment calculation process.
COMPASS Method
COMPASS: Comparable Offers Must Pass Adjustment to Subject Sales. Remember 'If comparable is WORSE, adjustment goes UP (+). If comparable is BETTER, adjustment goes DOWN (-)'
How to use: When you see adjustment questions, use COMPASS to remember that you're adjusting the comparable TO the subject. Ask yourself for each factor: Is the comparable better or worse than the subject? Worse = positive adjustment, Better = negative adjustment.
Exam Tip
Always double-check your arithmetic and the direction of adjustments. Write out the calculation step-by-step: list all adjustments, calculate the net adjustment, then apply it to the sale price.
Common Mistakes to Avoid
- -Confusing the direction of adjustments (adding when should subtract)
- -Making arithmetic errors when calculating net adjustments
- -Applying individual adjustments separately instead of calculating net adjustment first
Concept Deep Dive
Analysis
This question tests the fundamental concept of comparable sales adjustments in the sales comparison approach to real estate valuation. Adjustments are made to comparable properties to account for differences between the comparable and the subject property being appraised. The direction of adjustments is critical: positive adjustments are made when the comparable is inferior to the subject property, while negative adjustments are made when the comparable is superior to the subject. The net adjustment is then applied to the comparable's sale price to derive an adjusted value that better reflects what the subject property should be worth.
Background Knowledge
The sales comparison approach requires adjustments to comparable sales to account for differences in location, condition, size, age, and other factors that affect property value. Adjustments can be positive (when the comparable is inferior) or negative (when the comparable is superior) relative to the subject property.
Real-World Application
In practice, appraisers analyze multiple comparable sales and make adjustments for factors like location (busy street vs. quiet cul-de-sac), condition (needs repairs vs. move-in ready), and size (smaller vs. larger square footage) to estimate the subject property's market value.
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