A comparable sold for $500,000 with only these signed adjustments: +$25,000, −$10,000 and −$5,000. What are its net and gross percentages of the stated sale price?
Correct Answer
D) Net +2.0%; gross 8.0%
Net = (25000 − 10000 − 5000) / 500000 × 100 = 2%; gross = (25000 + 10000 + 5000) / 500000 × 100 = 8%. Common errors: swapping net and gross gives Net +8.0%; gross 2.0%; using only the positive adjustment as the net gives Net +5.0%; gross 8.0%; computing gross the same way as net gives Net +2.0%; gross 2.0%.
Why This Is the Correct Answer
Option D is correct because the net adjustment is (+$25,000 − $10,000 − $5,000) / $500,000 = $10,000 / $500,000 = +2.0%, and the gross adjustment is ($25,000 + $10,000 + $5,000) / $500,000 = $40,000 / $500,000 = 8.0%.
Why the Other Options Are Wrong
Option A: Net +8.0%; gross 2.0%
Option A, Net +8.0%; gross 2.0%, swaps net and gross. The signed total of $10,000 gives net +2.0%, and the absolute total of $40,000 gives gross 8.0%.
Option B: Net +5.0%; gross 8.0%
Option B, Net +5.0%; gross 8.0%, uses only the positive adjustment as the net ($25,000 / $500,000 = 5.0%). The negative adjustments must be included, giving $10,000 / $500,000 = +2.0% net.
Option C: Net +2.0%; gross 2.0%
Option C, Net +2.0%; gross 2.0%, computes gross the same way as net by letting the negatives offset. Gross uses absolute values, $40,000 / $500,000 = 8.0%.
Net nets out, gross grosses up
Net lets pluses and minuses cancel; gross ignores signs and piles everything up.
How to use: Use this whenever you compute adjustment percentages on a sales grid.
Exam Tip
Gross is at least as large as the absolute value of net, so a choice where gross is below net signals an error.
Common Mistakes to Avoid
- -Swapping net and gross percentages
- -Letting negative adjustments offset when computing gross
- -Leaving out negative adjustments when computing net
Concept Deep Dive
Analysis
This question tests net versus gross adjustment percentages. Net adjustment keeps the signs, so positives and negatives offset; gross adjustment adds the absolute values of all adjustments. Each total is divided by the comparable's $500,000 sale price.
Background Knowledge
The sales comparison grid reports both net and gross adjustment percentages for each comparable. Net shows the overall direction and size of the change to price, while gross shows the total amount of adjusting regardless of direction. A low net with a high gross can mean large offsetting adjustments, which deserves review.
Real-World Application
A comparable has a large upward GLA adjustment offset by downward condition and location adjustments. Its net is only 2% but its gross is 8%, so the appraiser reviews the support for each adjustment before giving the sale weight.
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?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
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?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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Previous Question
In a Fannie Mae appraisal of a 1,950-square-foot ranch home, the appraiser reconciled three adjusted sales, Sale 1 at $393,000, Sale 2 at $386,000 and Sale 3 at $396,000, to $390,000. Sale 2 sold for $392,000 and was recorded as 2,100 square feet, so it received a −$9,000 size adjustment at the market rate of $60 per square foot, plus +$3,000 for its older roof. A review finds Sale 2's living area was overstated by 200 square feet. Once Sale 2 is corrected, how does the $390,000 conclusion stand?
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