A fourplex of two-bedroom units is the subject property. A nearby triplex of two-bedroom units of similar age and quality sold for $585,000 after being listed at $599,000. The triplex sale included a detached three-car garage, which market data show contributes $15,000; the subject has no garage. Buyers of small multi-unit buildings in this area pay a consistent price per unit for this unit type. What value does this sale indicate for the subject?
Correct Answer
A) $760,000
Adjust the whole property first: $585,000 − $15,000 for the garage the subject lacks = $570,000. Then convert to the unit of comparison: $570,000 / 3 = $190,000 per unit, and apply it to four units: $190,000 × 4 = $760,000. The listing price is not used. Converting first and then deducting the garage ($780,000 − $15,000 = $765,000) leaves part of the garage inside the per-unit rate, ignoring the garage gives $780,000, and adding the garage gives $800,000.
Why This Is the Correct Answer
Option A is correct because the garage the subject lacks is removed from the whole price first: $585,000 − $15,000 = $570,000. Dividing by three units gives $190,000 per unit, and four units at $190,000 indicate $760,000.
Why the Other Options Are Wrong
Option B: $765,000
Option B, $765,000, converts first ($585,000 / 3 × 4 = $780,000) and then deducts $15,000. Because the garage's value was spread into the per-unit rate and scaled up by four-thirds, deducting $15,000 afterward leaves $5,000 of it in; the correct result is ($585,000 − $15,000) / 3 × 4 = $760,000.
Option C: $780,000
Option C, $780,000, ignores the garage: $585,000 / 3 = $195,000 per unit, times 4. The subject has no garage, so the $15,000 contribution must come out first, giving $760,000.
Option D: $800,000
Option D, $800,000, adds the garage instead of deducting it: ($585,000 + $15,000) / 3 × 4. The comparable has the superior feature, so its price is adjusted down, giving $760,000.
Adjust whole, then divide
Take out whole-property features in dollars before you split the price into units.
How to use: Use it when a multi-unit sale has a feature, such as a garage, that does not scale with the number of units.
Exam Tip
Use the sale price, not the listing price, and decide whether each adjustment applies to the whole property or to each unit before dividing.
Common Mistakes to Avoid
- -Deducting a whole-property adjustment after converting to a per-unit rate
- -Using the listing price instead of the sale price
- -Adjusting the comparable upward for a feature it has and the subject lacks
Concept Deep Dive
Analysis
The question tests converting a sale to a price per unit after adjusting the whole property for a feature the subject lacks. The garage is a whole-property item, not something that grows with the unit count, so remove it before dividing by the triplex's three units.
Background Knowledge
For 2–4 unit residential buildings, price per unit is a common unit of comparison when buyers pay a consistent amount per unit of similar type. Adjusting the whole property first and then dividing by the number of units is the more direct method.
Real-World Application
An appraiser values a fourplex using a triplex sale with a detached garage. The appraiser deducts the garage's market contribution from the triplex price, converts the result to a price per unit and applies it to the subject's four units.
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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Several adjusted comparable sales each produce a value indication for the subject. What should the appraiser do to reconcile these indications within the sales comparison approach?
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Adjusted prices are $257,000, $256,200, $258,000, $259,000 and $262,200, with gross adjustments of 3.7%, 7.5%, 0.0%, 6.0% and 8.8%. Which sale is likely the best indicator?