A comparable property with 2,400 square feet sold for $396,000. The subject has 2,200 square feet and is otherwise identical. Market evidence shows that price varies in direct proportion to area, at a constant price per square foot, with area measured consistently. What value does this indicate for the subject?
Correct Answer
A) $363,000
Comparable unit price=396000/2400=$165 per square foot. Because the market evidence shows proportional unit pricing,2200×165=$363,000. In an actual appraisal, total price per square foot includes other components and is not automatically the marginal area-adjustment rate. The inverse scale 432000, unchanged 396000 and wrong-area 330000 do not follow from this evidence.
Why This Is the Correct Answer
Option A is correct because the comparable's unit price is $396,000 / 2,400 = $165 per square foot. Under the proportional pricing the market evidence shows, 2,200 square feet × $165 = $363,000. The evidence shows a constant rate, so no other adjustment applies.
Why the Other Options Are Wrong
Option B: $432,000
Option B, $432,000, comes from scaling in the wrong direction: $396,000 × 2,400 / 2,200 = $432,000. A smaller property at the same unit rate must indicate a lower price, so the correct figure is 2,200 × $165 = $363,000.
Option C: $396,000
Option C, $396,000, leaves the comparable price unchanged. With proportional pricing the indication must reflect the 200 square foot size difference, giving 2,200 × $165 = $363,000.
Option D: $330,000
Option D, $330,000, deducts too much area: for example, $396,000 - (400 × $165) = $330,000, which removes twice the actual 200 square foot difference. The correct result is $396,000 - (200 × $165) = $363,000, the same as 2,200 × $165.
Divide, then multiply
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 two-step order to avoid flipping the ratio in unit-price questions.
Exam Tip
Before choosing, ask whether the answer moved in the right direction: a smaller subject at the same unit rate must indicate a lower price.
Common Mistakes to Avoid
- -Inverting the size ratio so the smaller home gets the higher price
- -Treating overall price per square foot as the marginal size adjustment rate in real assignments
- -Miscounting the size difference between the properties
Concept Deep Dive
Analysis
This question tests unit-of-comparison arithmetic when the market prices area at a constant rate. The evidence shows a constant price per square foot with no other differences, so the comparable's unit rate is applied directly to the subject's size. In real appraisals the overall price per square foot is not automatically the right rate for a size adjustment, but here the market evidence shows it.
Background Knowledge
Units of comparison such as price per square foot let appraisers compare properties of different sizes. In actual practice, total price per square foot includes land, site improvements and other components, so the marginal value of added area is usually less than the overall average. That is why the question states that this market prices area at a constant rate.
Real-World Application
In a large tract of nearly identical homes, a broker suggests pricing a 2,200 square foot model from a recent 2,400 square foot sale. The appraiser computes $165 per square foot as a rough check but recognizes that a constant overall rate usually overstates the value of size differences. The final size adjustment is supported with paired sales or regression rather than the overall average.
More Sales Comparison Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
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