A verified repeat sale of an otherwise unchanged property rose from $240,000 to $252,000 in exactly one year, with other material influences controlled. Another comparable sold for $310,000 half a year before the effective date. Using the annual percentage from the repeat sale, prorated on a simple basis on the original price, what is the comparable's adjusted price?
Correct Answer
A) $317,750
Annual indicated change=(252000/240000)−1=0.05. Simple half-year adjustment=310000 × 0.05 × 0.5; adjusted price=317750. This calculation uses simple proration, not a fractional compound power.
Why This Is the Correct Answer
Option A is correct because the repeat sale shows an annual change of $252,000 / $240,000 - 1 = 5%. Applied on a simple basis for half a year, the adjustment is $310,000 x 0.05 x 0.5 = $7,750. Adding that to $310,000 gives $317,750.
Why the Other Options Are Wrong
Option B: $325,500
Option B, $325,500, applies the full annual 5% rate ($310,000 x 1.05 = $325,500) instead of prorating it for half a year. The correct half-year adjustment is $310,000 x 0.05 x 0.5 = $7,750, giving $317,750.
Option C: $317,655
Option C, $317,655, uses a fractional compound power ($310,000 x 1.05^0.5, about $317,655) instead of the simple proration the stem requires. Simple proration gives $310,000 x 0.05 x 0.5 = $7,750, for $317,750.
Option D: $310,000
Option D, $310,000, makes no time adjustment at all even though the verified repeat sale indicates a 5% annual increase. The supported half-year adjustment is $7,750, giving $317,750.
Rate, then slice the year
First find the annual rate from the repeat sale, then multiply price by rate by fraction of the year. Simple means one multiplication on the original price, no exponents.
How to use: Use this whenever a time adjustment question says simple or prorated.
Exam Tip
Read whether the question asks for simple proration or compounding; the distractors are often built from the other method or from using the full year.
Common Mistakes to Avoid
- -Applying the full annual rate to a half-year period
- -Compounding when the task specifies simple proration
- -Leaving the comparable unadjusted despite evidence of changing market conditions
Concept Deep Dive
Analysis
This question tests extracting a market conditions rate from a verified repeat sale and applying it with simple proration. First find the annual change from the paired sales of the same property, then apply that rate to the comparable's original price for the fraction of the year specified. The stem expressly calls for simple, prorated treatment rather than compounding.
Background Knowledge
Repeat sales of the same, otherwise unchanged property are one way to measure changes in market conditions over time. Under simple interest logic, the rate is applied only to the original amount, so a half-year adjustment is half of the annual rate times the original price. Time adjustments, or the decision not to make one, need to be supported by evidence.
Real-World Application
An appraiser finds a home that sold twice, a year apart, with no renovations in between, and the second price was 5% higher. A comparable in the same market sold six months before the effective date, so the appraiser applies a supported half-year market conditions adjustment and documents the repeat-sale evidence.
More Sales Comparison Questions
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Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
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