A comparable’s cash price is $340,000. It requires a 4% time increase first, then a −$12,000 physical adjustment already expressed at the effective date. What is the adjusted price?
Correct Answer
B) $341,600
340000×1.04−12000=341600. Common errors: adding the physical adjustment instead of subtracting it gives $365,600; leaving out the physical adjustment gives $353,600; time-adjusting the physical adjustment that is already in effective-date dollars gives $341,120.
Why This Is the Correct Answer
Option B is correct because the time adjustment is applied first, $340,000 × 1.04 = $353,600, and then the −$12,000 physical adjustment is applied: $353,600 − $12,000 = $341,600. Since the physical adjustment is already in effective-date dollars, it should not be multiplied by the time factor.
Why the Other Options Are Wrong
Option A: $341,120
Option A is wrong because $341,120 time-adjusts the physical adjustment that is already in effective-date dollars: ($340,000 − $12,000) × 1.04 = $341,120. The correct sequence is $340,000 × 1.04 − $12,000 = $341,600.
Option C: $353,600
Option C is wrong because $353,600 leaves out the physical adjustment: $340,000 × 1.04 = $353,600. The supported −$12,000 must still be applied, giving $341,600.
Option D: $365,600
Option D is wrong because $365,600 adds the physical adjustment instead of subtracting it: $340,000 × 1.04 + $12,000 = $365,600. The adjustment is −$12,000, so the correct result is $341,600.
Time First, Then Today Dollars
Bring the sale price to today with the time factor, then add or subtract adjustments that are already in today's dollars.
How to use: Use this order when a question mixes a percentage time adjustment with dollar property adjustments.
Exam Tip
Read whether a dollar adjustment is already at the effective date; if it is, do not run it through the time factor.
Common Mistakes to Avoid
- -Applying the time factor to an adjustment already in current dollars
- -Adding a negative physical adjustment
- -Stopping after the time adjustment
Concept Deep Dive
Analysis
This question tests sequencing a percentage time adjustment and a dollar physical adjustment. The time increase is applied to the comparable price first. The physical adjustment is already stated in effective-date dollars, so it is subtracted afterward without being time-adjusted.
Background Knowledge
Adjustments are often applied in a sequence, with transaction and market conditions adjustments made before property adjustments. Percentage and dollar adjustments can be combined, but the appraiser must know what dollars each one is stated in. Time adjustments must be supported by market evidence.
Real-World Application
An appraiser has a comparable that sold for $340,000 in a market that has risen 4% since. She first time-adjusts to $353,600. She then subtracts a $12,000 physical adjustment derived from current paired sales, ending at $341,600.
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