The subject's market has shown a simple, non-compounded increase of 6% per year. A comparable sold at a cash-equivalent price of $320,000 exactly 12 months before the effective date, and no other adjustments apply. What is the time-adjusted price, to the nearest dollar?
Correct Answer
C) $339,200
320000×(1+0.06×1)=339200. Common errors: adjusting downward instead of upward gives $300,800; reporting only the adjustment gives $19,200; grossing up by dividing by 0.94 gives $340,426.
Why This Is the Correct Answer
Option C is correct because $320,000 × (1 + 0.06 × 1) = $320,000 × 1.06 = $339,200. The market rose, so the older sale price is adjusted upward. With simple interest, the increase is computed only on the original price.
Why the Other Options Are Wrong
Option A: $19,200
Option A, $19,200, is only the adjustment amount: $320,000 × 0.06 = $19,200. The question asks for the time-adjusted price, $320,000 + $19,200 = $339,200.
Option B: $300,800
Option B, $300,800, adjusts downward instead of upward: $320,000 × (1 − 0.06) = $300,800. The market change is an increase, so the correct price is $339,200.
Option D: $340,426
Option D, $340,426, comes from grossing up by dividing by 0.94: $320,000 ÷ 0.94 ≈ $340,426. A 6% increase on the original price is $320,000 × 1.06 = $339,200, not a division.
Multiply up, don't divide
A percentage increase means price × (1 + rate). Dividing by (1 − rate) gives a different, larger number.
How to use: Use this to avoid grossing-up errors on simple percentage time adjustments.
Exam Tip
Check whether the question asks for the adjustment or the adjusted price, and confirm the direction of the market change.
Common Mistakes to Avoid
- -Reporting the dollar adjustment instead of the adjusted price
- -Dividing by 0.94 instead of multiplying by 1.06
- -Applying an upward market change as a decrease
Concept Deep Dive
Analysis
This question tests a basic simple-interest time adjustment. The sale is exactly 12 months old, so a 6% annual rate applies once. Multiply the cash-equivalent price by 1.06 to bring it to the effective date.
Background Knowledge
A market-conditions adjustment brings an older sale's price to the effective date. Under simple interest, the change is earned only on the original amount. Time adjustments, or the lack of them, must be supported by evidence such as repeat sales of the same property.
Real-World Application
An appraiser uses a year-old sale in a market where repeat sales show about 6% annual appreciation. The appraiser increases the comparable's cash-equivalent price by 6% before making feature adjustments.
More Sales Comparison Questions
Which stated cause of supported value loss is external?
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:
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
Related Tools
Previous Question
Controlled equivalent sales, differing only in bedroom count, sold for $355,000 with four bedrooms and $340,000 with three. The subject has three bedrooms. What is the four-bedroom comparable’s adjusted price for this difference only?
Next Question
Under IVS effective 31 January 2025, as reproduced in the RICS Red Book Global Standards, which description correctly identifies liquidation value?