A comparable sale shows a transaction price of $520,000. The appraiser discovers the buyer received a $10,000 credit for new appliances and the seller paid $3,000 in buyer's closing costs. What is the adjusted sale price for comparison purposes?
Correct Answer
C) $507,000
The adjusted sale price is $507,000 ($520,000 - $10,000 - $3,000). Both the appliance credit and seller-paid closing costs are concessions that artificially inflated the sale price and must be subtracted to determine the true market value indication.
Why This Is the Correct Answer
Option C ($507,000) correctly subtracts both concessions from the sale price. The $10,000 appliance credit and $3,000 in seller-paid closing costs are both forms of seller concessions that reduce the effective amount the buyer paid. Since these concessions artificially inflated the recorded sale price, they must be subtracted: $520,000 - $10,000 - $3,000 = $507,000. This adjusted price represents what the buyer truly paid and provides an accurate market value indication for comparison purposes.
Why the Other Options Are Wrong
Option A: $520,000
Option A fails to make any adjustments for the seller concessions, leaving the sale price at the recorded $520,000, which overstates the true market value since the buyer received $13,000 in total concessions.
Option B: $510,000
Option B only adjusts for the $10,000 appliance credit but ignores the $3,000 in seller-paid closing costs, resulting in an incomplete adjustment that still overstates market value by $3,000.
Option D: $517,000
Option D incorrectly adds the concessions to the sale price instead of subtracting them, which would further inflate the price above the already overstated recorded amount.
SUBTRACT Seller Concessions
Remember 'SUBTRACT': Seller concessions Understate what buyer paid, so Bring down the Transaction price by Removing All Concessions Together
How to use: When you see seller concessions in a comparable sale, immediately think 'SUBTRACT' and identify all forms of seller assistance (credits, closing costs, repairs, etc.) that need to be removed from the recorded sale price.
Exam Tip
Always read the entire question carefully to identify ALL seller concessions - they often list multiple types in one problem, and you must subtract each one to get the correct adjusted sale price.
Common Mistakes to Avoid
- -Adding concessions instead of subtracting them
- -Only adjusting for one concession when multiple are present
- -Failing to recognize seller-paid closing costs as a concession requiring adjustment
Concept Deep Dive
Analysis
This question tests the fundamental appraisal principle of adjusting comparable sales for financing concessions and seller contributions that artificially inflate the transaction price. When sellers provide credits, pay buyer closing costs, or offer other concessions, the stated sale price doesn't reflect true market value because the buyer effectively paid less than the recorded price. Appraisers must identify and subtract these concessions to determine what the property would have sold for under typical market conditions. This adjustment ensures that comparable sales accurately reflect market value for comparison purposes.
Background Knowledge
Seller concessions include any financial benefits provided by the seller to facilitate the sale, such as appliance credits, closing cost assistance, repair credits, or below-market financing. These concessions must be identified and subtracted from the sale price because they represent value the buyer received beyond the real property itself, making the recorded sale price higher than what was actually paid for the property.
Real-World Application
In practice, appraisers review settlement statements, purchase contracts, and MLS data to identify seller concessions that may not be obvious from the recorded sale price alone, ensuring accurate market value conclusions for lending decisions.
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