A comparable sold two years ago for $400,000. Market conditions have appreciated at 3% per year, compounded annually. What is the time-adjusted sale price?
Correct Answer
B) $424,360
Why this is correct: compounding applies the second year’s rate to the first year’s result. Calculation: $400,000 × 1.03² = $400,000 × 1.0609 = $424,360. Why the other choices are wrong: $424,000 treats the two years as a simple 6%, which omits the $360 earned on the first year’s growth; $412,000 applies one year of appreciation to a sale that is two years old; $400,000 makes no adjustment at all.
Why This Is the Correct Answer
Why this is correct: compounding applies the second year’s rate to the first year’s result. Calculation: $400,000 × 1.03² = $400,000 × 1.0609 = $424,360. Why the other choices are wrong: $424,000 treats the two years as a simple 6%, which omits the $360 earned on the first year’s growth; $412,000 applies one year of appreciation to a sale that is two years old; $400,000 makes no adjustment at all.
More Sales Comparison Questions
A property generates $85,000 in Net Operating Income and sells for $1,062,500. What is the overall capitalization rate?
A property has potential gross income of $180,000, vacancy and collection loss of $15,000, and operating expenses of $65,000. What is the Net Operating Income?
A comparable sale occurred 8 months ago for $425,000. Market conditions indicate property values have increased 0.5% per month since that time. What is the adjusted sale price?
A property generates $150,000 in potential gross income. Market data indicates a 7% vacancy rate and operating expenses of 35% of effective gross income. If the cap rate is 9.5%, what is the indicated value?
A property sold for $320,000 one year ago. If market conditions have improved by 6% since that sale, what is the time-adjusted sale price for comparison purposes?
A commercial building cost $2,500,000 to construct. The land value is $600,000. If the building has suffered 15% physical deterioration and 8% functional obsolescence, what is the depreciated cost of the improvements?
A building's gross rent multiplier (GRM) is 120. If the monthly rent is $2,500, what is the indicated value?
In the cost approach, economic obsolescence is characterized as:
The concept of regression in property values means that:
A commercial property has potential gross income of $120,000, vacancy and collection loss of 8%, and operating expenses of $35,000. Using a cap rate of 9.5%, what is the indicated value?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Related Tools
Previous Question
A comparable sold two months ago in a flat market. It matches the subject in bedroom count, bathroom count and age, but has a fireplace the subject lacks, supported at $3,500. What adjustments does the grid require?
Next Question
A four-unit residential property sold for $412,000. The subject is a three-unit property of otherwise similar quality and location. On a price per unit basis, what value is indicated for the subject?