A comparable sold for $255,000 in a related-party transaction. Verification and matched market evidence establish that the specific sale conditions reduced its price by $23,000, with other material differences controlled. What conditions-of-sale adjustment follows?
Correct Answer
D) +$23,000
The stipulated transaction-condition effect reduced the price by $23,000, so add $23,000 to normalize the comparable. Relationship alone would not establish a below-market price, and a gap from broadly similar sales could reflect other differences. This exercise supplies independent support for that effect and controls other material influences.
Why This Is the Correct Answer
Option D is correct because verification and matched market evidence show the sale conditions reduced the price by $23,000. The comparable is inferior in conditions of sale, so $23,000 is added to bring it to a market-level price.
Why the Other Options Are Wrong
Option A: No adjustment, since the recorded price is the best evidence of value
Option A makes no adjustment on the claim that the recorded price is the best evidence of value. The stem establishes that the sale conditions lowered the price by $23,000, so the recorded price understates market value and needs adjustment.
Option B: +$11,500
Option B, +$11,500, is half of the $23,000 effect ($23,000 / 2). The evidence supports the full $23,000, so there is no basis for halving it.
Option C: -$23,000
Option C, -$23,000, has the right amount but the wrong direction. The conditions lowered the price, so the adjustment is added, not subtracted.
Price pushed down, push it up
If special conditions pushed a comparable's price down, the adjustment pushes it back up by the supported amount.
How to use: Use this for conditions-of-sale direction questions.
Exam Tip
Once the stem quantifies the effect and its direction, apply the full supported amount in the opposite direction of the distortion.
Common Mistakes to Avoid
- -Assuming any related-party sale is below market without evidence
- -Applying the adjustment in the wrong direction
- -Treating the recorded price as reliable despite known distortions
Concept Deep Dive
Analysis
This question tests a conditions-of-sale adjustment when evidence quantifies the price effect. Because the related-party conditions reduced the price by $23,000, that amount is added back to normalize the comparable.
Background Knowledge
Conditions-of-sale adjustments correct for atypical motivations or relationships that caused a price to differ from market value. A related-party relationship alone does not prove a below-market price, so the effect must be supported by verification and market evidence before it is applied.
Real-World Application
An appraiser learns a comparable was sold from a parent to a child. Interviews and comparison with closely matched market sales show the price was about $23,000 below market, so the appraiser adds that amount and explains the support.
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A comparable sold for $450,000. Verified market evidence shows a contribution of $8,000 for its two-car garage and $12,000 for the subject’s three-car garage. There are no other differences. What garage adjustment applies to the comparable?
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