A comparable's cash-equivalent price is $400,000. Market evidence supports an upward market-conditions adjustment equal to 5% of that price. What is the adjusted price?
Correct Answer
D) $420,000
400000×(1+5/100)=420000. The upward direction and percentage base are expressly supplied.
Why This Is the Correct Answer
Option D is correct because 5% of $400,000 is $20,000, and an upward adjustment adds it: $400,000 × (1 + 0.05) = $420,000. Both the direction and the base are given in the question.
Why the Other Options Are Wrong
Option A: $380,000
Option A, $380,000, is wrong because it subtracts the adjustment instead of adding it: $400,000 × 0.95 = $380,000. The adjustment is upward, so the result is $400,000 × 1.05 = $420,000.
Option B: $20,000
Option B, $20,000, is wrong because it reports only the adjustment amount, $400,000 × 0.05 = $20,000. The question asks for the adjusted price, $400,000 + $20,000 = $420,000.
Option C: $400,000
Option C, $400,000, is wrong because it leaves the price unadjusted. The market evidence supports a 5% upward adjustment, so the adjusted price is $420,000.
Rising market, raise the comp
If prices have risen since the comparable sold, its price is adjusted upward to reflect today's market.
How to use: Use this to check the direction of a market-conditions adjustment.
Exam Tip
Make sure your answer is the adjusted price when the question asks for it, not the dollar amount of the adjustment.
Common Mistakes to Avoid
- -Subtracting an upward adjustment
- -Reporting the adjustment amount instead of the adjusted price
- -Making a time adjustment without market evidence
Concept Deep Dive
Analysis
This question tests applying an upward percentage market-conditions adjustment to a stated base. The adjustment equals 5% of the $400,000 cash-equivalent price and is upward, so it is added to that price. The result is the adjusted price, not the adjustment amount alone.
Background Knowledge
A market-conditions adjustment reflects changes in prices between a comparable's sale date and the effective date of the appraisal. Time adjustments, or the lack of them, must be supported by evidence, such as resales of the same property or other market data.
Real-World Application
An appraiser's resale analysis shows prices in the area rose over the months since a comparable closed. She applies the supported percentage to the comparable's cash-equivalent price and adds it in the market-conditions line of the grid.
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?
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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?
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