A comparable sold for $400,000, needs a +5% market-conditions adjustment and a −$15,000 garage adjustment. Applying the standard sequence, the indicated value is:
Correct Answer
D) $405,000 — $400,000 × 1.05 = $420,000, then − $15,000
Why this is correct: The market-conditions adjustment is a percentage and applies to the sale price; the garage adjustment is a dollar amount and applies after the price has been brought to the effective date. Step 1: $400,000 x 1.05 = $420,000. Step 2: $420,000 - $15,000 = $405,000. Why the other choices are wrong: '$385,000, taking the garage adjustment and omitting the market-conditions step' subtracts the garage and never applies the stated 5% market movement. '$404,250, applying the dollar adjustment before the percentage' reverses the order: ($400,000 - $15,000) x 1.05 = $404,250, which escalates the garage adjustment by 5% as though a fixed dollar difference in features grew with the market. '$420,000, stopping after the time step' completes the percentage adjustment and forgets the garage. Exam tip: Percentages first, dollars second. The two orders here differ by $750, and both figures are usually on the page.
Why This Is the Correct Answer
Bringing the sale price to the effective date first gives $400,000 x 1.05 = $420,000, and deducting the $15,000 garage difference from that time-adjusted price gives $405,000. The garage adjustment is expressed in current dollars because it was derived from current market evidence, so it belongs at the end of the sequence where it is neither escalated nor discounted. The result is the comparable's indicated value for the subject.
Why the Other Options Are Wrong
Option A: $385,000, taking the garage adjustment and omitting the market-conditions step
$400,000 - $15,000 = $385,000 handles the feature difference and drops the market-conditions adjustment entirely. The stem supplies a +5% factor, and ignoring stated market evidence understates the indication by $20,000. Half the sequence is not the sequence.
Option B: $404,250, applying the dollar adjustment before the percentage
($400,000 - $15,000) x 1.05 = $404,250 reverses the order and lets the 5% act on the garage adjustment as well as on the sale price. That inflates a fixed dollar feature difference to $15,750 for no reason. The figure is close to the right one, which is precisely why the order matters on the exam.
Option C: $420,000, stopping after the time step
$420,000 is the correct result of the first step and nothing more. The comparable still differs from the subject by a garage worth $15,000, and that difference has to come out before the sale tells you anything about the subject. Stopping early is the most common careless error in grid arithmetic.
Time travel before you shop
First move the sale through time to the effective date, then shop for the differences in features. You cannot price a garage in last year's dollars, and you should not let this year's inflation rate inflate a garage.
How to use: Whenever a problem gives one percentage and one dollar figure, do the multiplication first and the addition or subtraction second, then look for both possible answers among the choices and pick the one your order produced.
Exam Tip
Compute the reversed order as well. Exam writers routinely put the wrong-order figure a few hundred dollars from the right one so that a plausible number is always available.
Common Mistakes to Avoid
- -Subtracting the dollar adjustment before applying the percentage
- -Netting all adjustments together and ignoring the sequence
- -Stopping after the market-conditions step
Concept Deep Dive
Analysis
Adjustments in the sales comparison approach are applied in a set order because percentage adjustments compound whatever they are applied to. Transactional adjustments and market conditions come first and are typically expressed as percentages of the sale price. Physical and locational adjustments, which are usually dollar amounts drawn from paired sales, come afterward against the time-adjusted price. Applying a dollar adjustment before a percentage lets the percentage act on the dollar figure too, which has no market meaning: a garage worth $15,000 today is worth $15,000, not $15,750, simply because prices rose 5%.
Background Knowledge
You need the standard adjustment sequence: real property rights conveyed, financing terms, conditions of sale, expenditures made immediately after purchase, market conditions, and then location and physical characteristics. You also need to know that the first group is applied sequentially, usually as percentages, while the later physical adjustments are typically dollar amounts applied to the time-adjusted price.
Real-World Application
An appraiser working a rising market applies a 5% time adjustment to each comparable's sale price at the top of the grid, then works down through site, gross living area and garage lines in current dollars. A reviewer can see at a glance that no feature adjustment was escalated by the market factor.
More Sales Comparison Questions
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