When is a dollar adjustment generally preferred over a percentage adjustment?
Correct Answer
B) When evidence supports a relatively fixed dollar effect rather than a price-proportional effect
A supported fixed-dollar contribution can be appropriate when the relevant market effect does not scale with property price. Select units and bases from evidence; elapsed time, location or size does not automatically require a percentage rather than dollar adjustment.
Why This Is the Correct Answer
Option B is correct because a dollar adjustment fits when evidence shows the market effect is a relatively fixed amount that does not scale with property price. Adjustments can be made by percentage or dollar amount, and the choice should follow how the market actually reacts to the difference.
Why the Other Options Are Wrong
Option A: When the comparable sale is more than one year old and time effects compound
Option A ties the dollar adjustment to sales more than one year old with compounding time effects. Compounding time effects tend to be expressed as percentages, and the age of a sale does not by itself determine the form of adjustment.
Option C: When the subject is larger than each of the comparables by more than ten percent of GLA
Option C ties it to a subject more than ten percent larger in GLA than each comparable. A size difference alone does not determine whether the market effect is fixed or proportional, and the ten percent figure is not a recognized rule.
Option D: When market appreciation is rapid and prices are changing month to month
Option D ties it to rapid month-to-month appreciation. Changing market conditions are commonly measured as rates of change, so rapid appreciation does not point toward a fixed dollar adjustment.
Fixed effect, fixed dollars
If the market pays about the same amount for a feature regardless of price, use dollars; if the effect grows with price, use a percentage.
How to use: Use this to choose between percentage and dollar adjustments.
Exam Tip
Pick the answer that bases the adjustment form on market evidence rather than on a sale's age, a size cutoff or market speed.
Common Mistakes to Avoid
- -Using percentage adjustments for features with a fixed dollar effect
- -Assuming time-related changes call for dollar rather than percentage adjustments
- -Choosing the adjustment form based on an arbitrary size threshold
Concept Deep Dive
Analysis
This question tests when a dollar adjustment fits better than a percentage adjustment. The deciding factor is how the market reacts: whether the effect is a fairly fixed dollar amount or scales with price. Age of sale, size or market speed does not by itself dictate the form of adjustment.
Background Knowledge
Appraisers may adjust total price or a unit of comparison, using percentages or dollar amounts. Percentage adjustments suit effects that scale with price, such as market conditions. Dollar adjustments suit effects that stay about the same regardless of price, such as some specific features in a given market.
Real-World Application
In a market of homes from $300,000 to $600,000, paired sales show a detached garage adds about $20,000 across that range. The appraiser applies a flat dollar adjustment rather than a percentage.
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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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?
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