A comparable sold for $384,000 and has 1,600 square feet of gross living area. The subject has 1,700 square feet. Using price per square foot of GLA as the unit of comparison, with no other differences, what does the comparable indicate for the subject?
Correct Answer
D) $408,000
The comparable’s unit price is $384,000 ÷ 1,600 = $240 per square foot; applied to the subject’s 1,700 square feet this indicates $408,000. Converting to a size-related unit removes the need for a separate size adjustment for small differences.
Why This Is the Correct Answer
Option D is correct because the comparable's unit price is $384,000 / 1,600 = $240 per square foot. Applying that rate to the subject's 1,700 square feet gives $240 × 1,700 = $408,000.
Why the Other Options Are Wrong
Option A: $384,000
Option A, $384,000, is the comparable's unadjusted sale price. It ignores the 100-square-foot size difference that the unit of comparison is meant to account for; the correct indication is $240 × 1,700 = $408,000.
Option B: $361,412
Option B, $361,412, comes from inverting the size ratio: $384,000 × 1,600 / 1,700. The correct calculation is $384,000 / 1,600 × 1,700 = $408,000.
Option C: $240,000
Option C, $240,000, takes the $240 unit rate and multiplies it by 1,000 instead of the subject's 1,700 square feet. The correct result is $240 × 1,700 = $408,000.
Divide by comp, multiply by subject
Divide the comparable's price by its size to get the rate, then multiply the rate by the subject's size.
How to use: Use this when a question asks for an indication using price per square foot.
Exam Tip
If the subject is larger than the comparable, the indicated value should be higher than the comparable's price, which quickly eliminates choices at or below $384,000.
Common Mistakes to Avoid
- -Using the comparable's price without accounting for size
- -Inverting the size ratio
- -Multiplying the unit rate by the wrong area
Concept Deep Dive
Analysis
This question tests applying a price per square foot unit of comparison. The comparable's price is converted to a unit rate, which is then multiplied by the subject's gross living area to give an indicated value.
Background Knowledge
Converting sale prices to a size-related unit of comparison, such as price per square foot, can reduce or remove the need for a separate size adjustment when differences are small. The unit rate is derived from the comparable and applied to the subject's size. This assumes price per square foot behaves consistently across the size range, which the appraiser should consider.
Real-World Application
An appraiser has a comparable that sold for $384,000 with 1,600 square feet. Using the $240 per square foot rate on the subject's 1,700 square feet, the appraiser gets an indication of $408,000 and checks it against the other comparables.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
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