A pool adds $15,000 in one neighborhood but only $5,000 in a colder market two hours away. What principle does this illustrate?
Correct Answer
A) Contributory value is market-specific, not a universal figure
Why this is correct: The value a feature contributes is determined by local market preferences and utility. A pool has higher utility and value in a warm climate neighborhood than in a colder one. Why the other choices are wrong: While pools may depreciate, the principle here is about value, not depreciation rate. The larger figure is not universally correct. Paired data can be trusted if from the same market. Exam tip: Adjustment figures are market-specific. Never import a value from a different market without support.
Why This Is the Correct Answer
Option A names the principle precisely: contributory value is market-specific rather than a universal figure attached to the feature. The same pool, physically identical, contributes different amounts because the buyers differ, and buyer behavior is what the appraiser is measuring. This also explains the practical rule that adjustments must be extracted from the subject's competitive market. Both dollar figures in the stem are right where they were measured and wrong anywhere else.
Why the Other Options Are Wrong
Option B: Pools depreciate faster in cold climates
Depreciation rate and contributory value are different measurements. Physical deterioration may indeed proceed differently in a freeze-thaw climate, but the stem describes a difference in what buyers pay, not a difference in wear, and a brand-new pool would show the same gap. Substituting a depreciation explanation for a demand explanation misidentifies what the paired data revealed.
Option C: The larger of the two figures is the correct one everywhere
Choosing the larger figure as universally correct assumes a feature carries an intrinsic value independent of the buyers considering it, which is exactly the misconception the example is constructed to defeat. Applying $15,000 in the colder market would overstate the adjustment by $10,000 on every comparable carrying a pool. There is no default rule that resolves conflicting market evidence in favor of the higher number.
Option D: Paired data cannot be trusted across seasons
Nothing here concerns seasonality or the reliability of the paired technique; the two data sets came from two different geographic markets, and each pairing appears to have worked. Paired analysis is trustworthy when the sales are drawn from one market and differ in one meaningful respect. Blaming the method for a difference the method correctly detected discards a working tool.
Same Pool, Different Buyers
The pool does not change when you drive two hours north; the buyers do. Contributory value lives in the buyer's head, not in the concrete. Ask what this market's buyers pay, never what the feature is worth in general, because in general is not a market.
How to use: Whenever a stem gives two different amounts for the same feature in two places, the tested principle is market specificity. Choose the option about local market derivation. Reject options that pick one number as universal, that reframe the difference as depreciation, or that blame the analytical technique.
Exam Tip
Never carry an adjustment across market boundaries or forward from a prior assignment; re-derive it from sales in the subject's own competitive area and say in the report where it came from.
Common Mistakes to Avoid
- -Reusing an adjustment derived in one market area for a subject in a different market area
- -Substituting depreciated cost for contributory value without testing market reaction
- -Defining the competitive market area too broadly so that dissimilar buyer pools are pooled together
Concept Deep Dive
Analysis
This question tests the market-specific nature of contributory value. The contribution a component makes to total property value is set by what buyers in that particular market will pay for it, which depends on local climate, culture, income, competing inventory, and what the typical buyer expects a home in that price range to include. A pool in a hot-climate neighborhood where most competing homes have one is close to a requirement, and its absence would be penalized; two hours away in a colder market with a short swimming season and higher maintenance burden, the same physical improvement delivers less utility and may even trouble some buyers who see cost and liability. The $15,000 and $5,000 figures are therefore not in conflict; each is a correct measurement of a different market. This is why an adjustment must be derived from sales in the subject's own competitive market area, and why importing a figure from another market, a cost manual, or a prior assignment is unsupported no matter how carefully that figure was originally derived.
Background Knowledge
You need to know the principle of contribution, which measures a component by what it adds to the whole rather than by its cost, and the requirement that adjustments be derived from the subject's competitive market area. You should also know how to define that market area by the boundaries within which buyers actually consider substitute properties, since that definition determines which sales may legitimately supply adjustment evidence.
Real-World Application
An appraiser who works two counties keeps separate adjustment support for each. In the southern county, paired sales show a pool contributing $14,000 to $17,000; in the northern lake county the same analysis yields $4,000 to $6,000, and the workfile documents each derivation separately so neither figure migrates into the other market's reports.
More Sales Comparison Questions
Excess land differs from surplus land in that excess land:
A paired sales analysis reveals that homes with stainless-steel appliances sell for $2,100 more than identical homes with standard appliances — but only when the homes are priced below $350,000. In the subject’s neighborhood, median sale price is $410,000. What is the appraiser’s obligation regarding the $2,100 appliance adjustment?
GLA differs by 210 sq ft between subject and comparable. Paired sales support $65 per sq ft of living area. The line adjustment is:
Paired sales are drawn from transactions six months apart in a stable market. The time adjustment needed is:
The most appropriate unit of comparison is determined by:
A comparable superior to the subject in every adjusted category should produce an indication that is:
Three sales support $520,000; the borrower's purchase contract is $505,000. May the appraisal conclude above the contract price?
A comparable sold for $300,000 with the seller carrying a loan 2 points below market, a benefit worth $8,000. What is its cash-equivalent price?
Why is a foreclosure sale generally a poor comparable in a stable market?
A comparable sold 8 months ago for $250,000 in a market appreciating 6% per year. What is the time-adjusted price?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam