A comparable sold 8 months ago for $250,000 in a market appreciating 6% per year. What is the time-adjusted price?
Correct Answer
A) $260,000, using eight months of appreciation
Why this is correct: In an appreciating market, adjust the old sale price forward. Annual rate 6% over 8 months = (6% × 8/12) = 4%. $250,000 × 1.04 = $260,000. Why the other choices are wrong: '$265,000, applying the full annual rate' uses 6% for 8 months. '$240,000, discounting for the older sale' mistakenly reduces the price. '$254,000, applying appreciation for four months' uses an incorrect time period. Exam tip: Market conditions adjustment brings the comparable to the effective date; in rising markets, add.
Why This Is the Correct Answer
At 6 percent per year the monthly rate is 0.5 percent, so eight months gives 4 percent and $250,000 × 1.04 = $260,000.
Why the Other Options Are Wrong
Option B: $265,000, applying the full annual rate
$265,000 applies the full annual 6 percent for a sale only eight months old, overstating the adjustment.
Option C: $240,000, discounting for the older sale
$240,000 adjusts downward, which reverses the direction. An appreciating market brings older sales upward.
Option D: $254,000, applying appreciation for four months
$254,000 reflects roughly four months of appreciation rather than the eight months elapsed.
Rate Times Elapsed Time
Rate Times Elapsed Time. Eight months of a six percent year is four percent, not six.
How to use: Convert the annual rate to a monthly one first, then multiply by the months elapsed.
Exam Tip
The rate should be derived from evidence such as resales or paired sales over time, and the derivation belongs in the report.
Common Mistakes to Avoid
- -Applying the full annual rate regardless of elapsed time
- -Adjusting downward for an older sale in a rising market
- -Assuming a rate without deriving it from evidence
Concept Deep Dive
Analysis
A market conditions adjustment brings a past sale forward to the effective date, and the calculation must use the elapsed time rather than the annual rate as quoted. At 6 percent per year the monthly rate is 0.5 percent, so eight months produces 4 percent — $250,000 × 1.04 = $260,000. The distractors correspond to three specific errors: applying the full annual rate regardless of elapsed time, adjusting downward as though an older sale should be discounted rather than brought forward, and using the wrong number of months. The direction is worth fixing in mind. In an appreciating market a sale from the past occurred at lower price levels, so it is adjusted upward to state what it would bring today. A depreciating market reverses the sign. In practice the rate itself is derived from evidence — resales of the same property, paired sales over time, or a trend in median prices — rather than assumed, and the derivation belongs in the report.
Background Knowledge
Market conditions adjustments convert a past sale price to the effective date using a rate derived from market evidence, applied for the elapsed time between sale and effective date.
Real-World Application
An appraiser adjusts a sale from eight months earlier upward by 4 percent to $260,000, citing repeat sales evidence supporting the 6 percent annual rate.
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