A comparable sold for $400,000. The appraiser's market-supported adjustments are +$30,000 for GLA, -$8,000 for location, +$12,000 for condition and +$6,000 for a garage. What is the gross adjustment percentage, measured against the comparable's sale price?
Correct Answer
D) 14.0%
Gross adjustment adds every adjustment without regard to sign: $30,000 + $8,000 + $12,000 + $6,000 = $56,000, and $56,000 / $400,000 = 14.0%. The 10.0% figure is the net adjustment ($40,000), 12.0% counts only the upward adjustments ($48,000), and 12.7% divides the correct gross total by the adjusted price of $440,000 instead of the sale price. Fannie Mae sets no net or gross limit, so the percentage is a measure of how much the sale had to be changed, not a pass/fail test.
Why This Is the Correct Answer
Option D is correct because the absolute adjustments total $30,000 + $8,000 + $12,000 + $6,000 = $56,000, and $56,000 divided by the $400,000 sale price is 14.0%. The minus sign on the location adjustment shows direction, not size, so it still adds to the gross total.
Why the Other Options Are Wrong
Option A: 10.0%
Option A, 10.0%, is the net adjustment: $30,000 - $8,000 + $12,000 + $6,000 = $40,000, and $40,000 / $400,000 = 10.0%. Gross adjustment ignores signs, so the correct total is $56,000, or 14.0%.
Option B: 12.0%
Option B, 12.0%, counts only the upward adjustments: $30,000 + $12,000 + $6,000 = $48,000, or 12.0% of $400,000. The $8,000 location adjustment must also be added, giving $56,000, or 14.0%.
Option C: 12.7%
Option C, 12.7%, divides the correct $56,000 gross total by the adjusted price of $440,000 instead of the $400,000 sale price. Measured against the sale price, the gross adjustment is 14.0%.
Gross ignores signs
Net lets pluses and minuses cancel; gross drops the signs and adds everything. Both are divided by the comparable sale price.
How to use: Use this whenever a grid mixes upward and downward adjustments and you are asked for a gross figure.
Exam Tip
Write each adjustment as a positive number before adding for gross, then divide by the sale price, not the adjusted price.
Common Mistakes to Avoid
- -Reporting the net adjustment as the gross adjustment
- -Dividing by the adjusted sale price instead of the sale price
- -Letting downward adjustments reduce the gross total
Concept Deep Dive
Analysis
This question tests the difference between net and gross adjustment and the base used to express them. Gross adjustment sums the absolute value of every line adjustment, so a downward adjustment adds to the total rather than offsetting it. The percentage is then taken against the comparable sale price, the figure the adjustments start from.
Background Knowledge
Net adjustment is the algebraic sum of all adjustments, so upward and downward items offset each other; gross adjustment is the sum of their absolute values. Gross adjustment shows how much total change a sale needed, which is why appraisers use it as one indicator of comparability when reconciling the adjusted sale prices.
Real-World Application
An appraiser reviewing a grid sees one comparable with a small net adjustment but several large offsetting line items. Computing the gross percentage shows the sale needed far more change than the net figure suggests, which affects how much weight it should receive.
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An appraiser reconciling three approaches has value indications of $355,000, $362,000 and $358,000, with assigned weights of 50%, 20% and 30%, respectively. What is the weighted indication, rounded to the nearest dollar?
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