A comparable’s cash-equivalent price is $265,000. Use a supported simple +0.25% per month adjustment on the original price for a verified eight-month contract-to-effective-date interval. Apply separate market-supported feature adjustments of −$9,000 and +$4,500 at the effective date. What adjusted price results?
Correct Answer
C) $265,800
265000 × (1 + 0.0025 × 8) − 9000 + 4500 = 265800. Time is based on the original cash-equivalent price; the feature contributions are separate stated amounts.
Why This Is the Correct Answer
Option C is correct because the time adjustment is $265,000 × (1 + 0.0025 × 8) = $265,000 × 1.02 = $270,300. The feature adjustments are then applied as stated amounts: $270,300 − $9,000 + $4,500 = $265,800. Simple interest applies the rate only to the original base.
Why the Other Options Are Wrong
Option A: $270,300
Option A shows $270,300, which is the time-adjusted price of $265,000 × 1.02 with the feature adjustments left out. Adding −$9,000 and +$4,500 gives the correct $265,800.
Option B: $260,500
Option B shows $260,500, which is $265,000 − $9,000 + $4,500 with the time adjustment omitted. The verified eight-month interval at +0.25% per month adds $5,300, giving $265,800.
Option D: $265,710
Option D shows $265,710, which applies the time adjustment to the feature-adjusted price: ($265,000 − $9,000 + $4,500) × 1.02 = $260,500 × 1.02 = $265,710. The stem bases time on the original price, so the correct result is $265,000 × 1.02 − $9,000 + $4,500 = $265,800.
Time first, on the original
Grow the original price for time, then add or subtract the dollar feature adjustments.
How to use: Use this to order steps when a problem mixes a percentage time adjustment with dollar feature adjustments.
Exam Tip
Note which base the stem says to use for the percentage; distractors often apply it to an already adjusted figure.
Common Mistakes to Avoid
- -Forgetting the time adjustment when feature adjustments are present
- -Applying the time percentage to the feature-adjusted price instead of the original
- -Compounding a rate stated as simple
Concept Deep Dive
Analysis
This question tests the sequence of a simple time adjustment followed by separate feature adjustments. The time adjustment uses simple percentage growth on the original cash-equivalent price, and the feature adjustments are fixed dollar amounts added afterward. The order matters because applying the percentage to a different base changes the answer.
Background Knowledge
Market conditions adjustments account for price changes between the comparable's contract date and the effective date, and they must be supported by evidence. A simple monthly rate is applied to the original price only, not compounded. Feature adjustments stated in dollars at the effective date are added separately.
Real-World Application
An appraiser has a comparable that went under contract eight months before the effective date in a market rising about 0.25% per month. She applies the time adjustment to the cash-equivalent price, then enters separate dollar adjustments for an extra bathroom and a smaller lot.
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