A comparable sold for $415,000 and requires a 3% market conditions adjustment upward. Its time-adjusted price is:
Correct Answer
D) $427,450
Why this is correct: The governing concept is applying a percentage adjustment for market conditions (time) to a comparable sale price. An upward adjustment of 3% means the market value increased since the sale date. The calculation is: $415,000 × (1 + 0.03) = $415,000 × 1.03 = $427,450. This time adjustment is made first to express the comparable's price in current dollars before other adjustments. Why the other choices are wrong: "$540,000, misapplying the percentage" incorrectly uses a much larger multiplier, not 1.03. "$402,550, adjusting downward" subtracts 3% ($415,000 × 0.97), which is a downward adjustment, not the required upward adjustment. "$418,000, applying a flat amount" adds a flat $3,000 (which is not 3% of $415,000) instead of correctly calculating 3% of the sale price. Exam tip: For a percentage increase, multiply by (1 + decimal). Remember: 'upward adjustment' means the comparable's price was lower in the past, so you increase it to current value.
Why This Is the Correct Answer
A percentage adjustment multiplies the price, so $415,000 × 1.03 = $427,450.
Why the Other Options Are Wrong
Option A: $540,000, misapplying the percentage
$540,000 reflects a misplaced decimal or multiplication by 1.3 rather than 1.03.
Option B: $402,550, adjusting downward
$402,550 adjusts downward, which would apply only in a declining market.
Option C: $418,000, applying a flat amount
$418,000 treats the 3 percent as a flat $3,000, confusing a percentage with a dollar amount.
Percentages Multiply
Percentages Multiply, dollars add. Three percent of $415,000 is not $3,000.
How to use: Identify each adjustment's type before computing. A grid commonly mixes percentage and dollar adjustments.
Exam Tip
Where percentage and dollar adjustments both apply, apply the percentage adjustment first and the dollar adjustments to the result.
Common Mistakes to Avoid
- -Treating a percentage as a dollar amount
- -Reversing the direction of the adjustment
- -Applying dollar adjustments before the percentage adjustment
Concept Deep Dive
Analysis
A percentage adjustment multiplies the sale price rather than adding a fixed sum, so a 3 percent upward market conditions adjustment gives $415,000 × 1.03 = $427,450. The distractors each capture a distinct error. Adjusting downward reverses the direction, which would be correct only in a declining market. Applying a flat $3,000 confuses a percentage with a dollar amount — a frequent slip when a grid mixes both types of adjustment. And the wildly high figure reflects a misplaced decimal or a multiplication by 1.3 instead of 1.03. The wider point is worth holding: market conditions adjustments are conventionally expressed as percentages because appreciation acts proportionally on price, while feature adjustments such as a garage or a bathroom are dollar amounts because a garage contributes roughly the same value regardless of the house's price. Knowing which type applies is as important as the arithmetic.
Background Knowledge
Market conditions adjustments are typically expressed as percentages and applied multiplicatively, because appreciation acts proportionally on price. Feature adjustments are typically dollar amounts.
Real-World Application
An appraiser applies a 3 percent market conditions adjustment to a $415,000 sale, carrying $427,450 forward before applying dollar adjustments for features.
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