A comparable sold for $355,000. Verified evidence supports a −5% location adjustment based on that original price and a separate +$70/sqft contribution for its 200-sqft shortfall relative to the subject. Apply only these two adjustments. What price results?
Correct Answer
C) $351,250
355000 × 0.95 + 200 × 70 = 351250. The specified percentage base is the original price; the area contribution is a separate fixed dollar amount.
Why This Is the Correct Answer
Option C is correct because the location adjustment reduces the original price by 5%: $355,000 × 0.95 = $337,250. The size shortfall adds 200 × $70 = $14,000, giving $337,250 + $14,000 = $351,250. The percentage applies to the original price, and the area contribution is a separate fixed dollar amount.
Why the Other Options Are Wrong
Option A: $386,750
Option A, $386,750, is wrong because it reverses the location sign: $355,000 × 1.05 = $372,750, plus $14,000 = $386,750. The supported location adjustment is −5%, so the correct result is $355,000 × 0.95 + 200 × $70 = $351,250.
Option B: $323,250
Option B, $323,250, is wrong because it subtracts the size adjustment: $355,000 × 0.95 = $337,250, minus $14,000 = $323,250. The comparable is 200 sqft smaller than the subject, so the $14,000 is added, giving $351,250.
Option D: $337,250
Option D, $337,250, is wrong because it applies only the location adjustment, $355,000 × 0.95 = $337,250, and leaves out the +$14,000 size adjustment (200 × $70). Applying both gives $351,250.
Inferior comp, add; superior, subtract
When the comparable lacks something the subject has, adjust its price up; when it has something better, adjust down. Then check which figure each percentage is based on.
How to use: Use this to set the sign of each adjustment before doing the arithmetic in a grid problem.
Exam Tip
In mixed percentage and dollar problems, compute each adjustment from the base the question names, then add or subtract in the correct direction.
Common Mistakes to Avoid
- -Reversing the direction of the location adjustment
- -Subtracting the size adjustment when the comparable is smaller than the subject
- -Forgetting to apply one of the two adjustments
Concept Deep Dive
Analysis
This question tests combining a percentage adjustment with a fixed dollar adjustment on a comparable. The −5% location adjustment is based on the original $355,000 price, and the 200-sqft shortfall is a separate +$70 per sqft dollar adjustment. The comparable is inferior in size, so that adjustment is added.
Background Knowledge
Adjustments are made to the comparable's price to reflect how it differs from the subject. Percentage and dollar adjustments may be combined, and the base for any percentage adjustment must be identified, because applying a percentage to a different subtotal changes the result.
Real-World Application
An appraiser's comparable sits on a busier street than the subject and is about 200 square feet smaller. Paired data supports a 5% downward location adjustment from the sale price, and a separate per-square-foot contribution for the size difference, so she applies both in the grid.
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A property sold for $360,000. Market evidence indicates a site value of $90,000, the dwelling contains 2,000 square feet, and there are no other components. What is the indicated value of the improvements per square foot?