A comparable sold for $396,000 and contains 2,400 square feet. The subject contains 2,200 square feet. On a price per square foot basis, what value is indicated for the subject?
Correct Answer
A) $363,000
Why this is correct: the comparable indicates $396,000 ÷ 2,400 = $165.00 per square foot. Calculation: 2,200 × $165.00 = $363,000. Why the other choices are wrong: $432,000 inverts the ratio and scales the price up for a subject that is smaller, moving the indication in the wrong direction; $396,000 makes no size adjustment at all; $330,000 applies the rate to 2,000 square feet rather than the subject’s 2,200.
Why This Is the Correct Answer
Why this is correct: the comparable indicates $396,000 ÷ 2,400 = $165.00 per square foot. Calculation: 2,200 × $165.00 = $363,000. Why the other choices are wrong: $432,000 inverts the ratio and scales the price up for a subject that is smaller, moving the indication in the wrong direction; $396,000 makes no size adjustment at all; $330,000 applies the rate to 2,000 square feet rather than the subject’s 2,200.
More Sales Comparison Questions
A property generates $85,000 in Net Operating Income and sells for $1,062,500. What is the overall capitalization rate?
A property has potential gross income of $180,000, vacancy and collection loss of $15,000, and operating expenses of $65,000. What is the Net Operating Income?
A comparable sale occurred 8 months ago for $425,000. Market conditions indicate property values have increased 0.5% per month since that time. What is the adjusted sale price?
A property generates $150,000 in potential gross income. Market data indicates a 7% vacancy rate and operating expenses of 35% of effective gross income. If the cap rate is 9.5%, what is the indicated value?
A property sold for $320,000 one year ago. If market conditions have improved by 6% since that sale, what is the time-adjusted sale price for comparison purposes?
A commercial building cost $2,500,000 to construct. The land value is $600,000. If the building has suffered 15% physical deterioration and 8% functional obsolescence, what is the depreciated cost of the improvements?
A building's gross rent multiplier (GRM) is 120. If the monthly rent is $2,500, what is the indicated value?
In the cost approach, economic obsolescence is characterized as:
The concept of regression in property values means that:
A commercial property has potential gross income of $120,000, vacancy and collection loss of 8%, and operating expenses of $35,000. Using a cap rate of 9.5%, what is the indicated value?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Related Tools
Previous Question
In a market where mortgage financing is available at 6% with a 75% loan-to-value ratio, and equity investors require a 12% return, what is the overall capitalization rate using the band of investment technique?
Next Question
In calculating Net Operating Income (NOI), which of the following would NOT be deducted from Effective Gross Income?