Market evidence indicates a constant price per dwelling unit among otherwise matched properties. A four-unit property sells for $412,000. What value does this indicate for a matched three-unit property?
Correct Answer
D) $309,000
412000 / 4 × 3 = 309000. The market evidence establishes a suitable unit model and comparability; equal quality and location alone would not guarantee proportional property value.
Why This Is the Correct Answer
Option D is correct because $412,000 / 4 = $103,000 per dwelling unit, and $103,000 x 3 = $309,000. Market evidence indicates a constant per-unit rate for otherwise matched properties, so this scaling gives the indication for three units.
Why the Other Options Are Wrong
Option A: $412,000
Option A, $412,000, is simply the four-unit sale price with no conversion. It ignores that the subject has three units, not four.
Option B: $103,000
Option B, $103,000, is the price per unit ($412,000 / 4) but stops there without multiplying by three units. The indication for three units is $103,000 x 3 = $309,000.
Option C: $137,333
Option C, $137,333, divides the sale price by three ($412,000 / 3) instead of by the comparable's four units. The correct calculation is $412,000 / 4 x 3 = $309,000.
Divide by theirs, times yours
Divide the comparable's price by its units, then multiply by the subject's units. Theirs goes on the bottom, yours goes on top.
How to use: Use this for any price-per-unit conversion question.
Exam Tip
Watch for distractors that stop at the per-unit figure or divide by the subject's units instead of the comparable's.
Common Mistakes to Avoid
- -Stopping at the per-unit price
- -Dividing by the subject's number of units
- -Assuming a per-unit model fits without market support
Concept Deep Dive
Analysis
This question tests use of a unit of comparison. With a constant per-unit rate, convert the four-unit sale to a price per unit and then multiply by the subject's three units. The key is to divide by the comparable's units and multiply by the subject's.
Background Knowledge
Units of comparison express sale prices in terms of a common unit, such as price per dwelling unit, per square foot or per room. This lets the appraiser compare properties of different sizes. A proportional per-unit model works only when the evidence supports it for the property type and market.
Real-World Application
An appraiser valuing a triplex finds a recent fourplex sale in the same area with similar quality and location. With market evidence supporting a per-unit model, the appraiser converts the fourplex price to a per-unit rate and applies it to the triplex's three units.
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Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
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Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
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