A home with a fireplace sold for $420,240. An otherwise identical home without one sold four months earlier for $412,000. The market rose a supported 0.5% per month (simple) over that period. After adjusting for market conditions, what does this pair indicate for the fireplace?
Correct Answer
B) $0
Adjust for market conditions first: $412,000 × (1 + 0.005 × 4) = $420,240. After that adjustment the prices are equal, so the pair indicates no contribution for the fireplace. Paired sales must have occurred at the same time or be adjusted for market conditions.
Why This Is the Correct Answer
Option B is correct because the earlier sale adjusted for four months at 0.5% per month is $412,000 × 1.02 = $420,240. That equals the price of the home with the fireplace, so the difference is $420,240 − $420,240 = $0 and the pair indicates no contribution for the fireplace.
Why the Other Options Are Wrong
Option A: $8,240
Option A, $8,240, is the raw difference $420,240 − $412,000, which ignores the market change. Once the earlier sale is adjusted to $420,240 for the 2% rise, the gap disappears.
Option C: $4,120
Option C, $4,120, results from adjusting the earlier sale for only two months (1%) instead of four: $412,000 × 1.01 = $416,120, and $420,240 − $416,120 = $4,120. The full four months at 0.5% is 2%, so the earlier sale becomes $420,240 and the gap is $0.
Option D: $16,480
Option D, $16,480, results from adjusting the earlier sale downward instead of upward: $412,000 × (1 − 0.02) = $403,760, and $420,240 − $403,760 = $16,480. Prices rose over the four months, so the earlier sale is adjusted up to $412,000 × 1.02 = $420,240, leaving a $0 difference.
Time first, then the feature
Adjust paired sales to the same date before reading what the remaining difference says about a feature.
How to use: Use this when a paired sales question gives sales at different dates.
Exam Tip
If a paired sales question mentions a market trend, apply it before subtracting the prices.
Common Mistakes to Avoid
- -Subtracting raw prices without a time adjustment
- -Attributing market appreciation to a physical feature
- -Relying on one pair as conclusive proof
Concept Deep Dive
Analysis
This question tests that paired sales must be adjusted for market conditions before isolating a feature's contribution. Bring the earlier sale forward to the date of the later sale first, then compare. Any remaining difference is the indication for the feature.
Background Knowledge
Paired sales analysis isolates the effect of one difference by comparing otherwise similar sales. The paired sales must have occurred at the same time or be adjusted for market conditions. Otherwise, price changes over time can be mistaken for the value of a feature.
Real-World Application
An appraiser sees that a home with a fireplace sold for about $8,000 more than a similar home without one. After adjusting the earlier sale for four months of market growth, the prices match, so the appraiser does not support a fireplace adjustment from this pair.
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
A townhouse comparable listed at $419,000 and sold for $412,000. As part of the purchase, the buyer also took over the $9,000 unpaid balance of a $15,000 special assessment for a new sewer main, billed with the property taxes. The subject received the same sewer main, and its assessment has been paid in full. Paired sales in the subdivision show homes that still carry an unpaid balance sell for less than paid-off homes by about the amount of the balance. What is the comparable's price on the subject's paid-off basis?
Next Question
A comparable sold for $310,000. Relative to the subject, it has an extra garage contribution of $12,000 and lacks a deck worth $5,000. These are supported current-dollar differences. What adjusted price results?