A property sold for $320,000 one year ago. If market conditions have improved by 6% since that sale, what is the time-adjusted sale price for comparison purposes?
Correct Answer
C) $339,200
Why this is correct: To adjust a past sale to current market conditions, multiply the sale price by (1 + appreciation rate). Calculation: $320,000 x 1.06 = $339,200. Why the other choices are wrong: $320,000 ignores the market change. $301,887 incorrectly applies a 6% decrease. $326,000 adds a flat 6% of $6,000, not a compounded adjustment. Exam tip: For time adjustments, 'improved' means multiply by over 1.0 (e.g., 1.06 for a 6% increase).
Why This Is the Correct Answer
Option B correctly applies the time adjustment formula by multiplying the original sale price by 1.06 to account for the 6% market improvement. The calculation is $320,000 × 1.06 = $339,200, which represents what the property would have sold for under current market conditions. This adjusted price can now be properly compared to the subject property being appraised. The 1.06 multiplier correctly reflects that the property is worth 6% more than its original sale price due to improved market conditions.
Why the Other Options Are Wrong
TIME+ Formula
TIME+ = Time adjustment uses Multiplication Plus: Original Price × (1 + percentage change). For improvements, ADD the percentage to 1.00; for declines, SUBTRACT from 1.00.
How to use: When you see a time adjustment question, immediately identify if the market improved (multiply by 1 + %) or declined (multiply by 1 - %), then apply the TIME+ formula to the original sale price.
Exam Tip
Always convert percentages to decimals and remember that market improvements require multiplying by a number greater than 1.00, while market declines require multiplying by a number less than 1.00.
Common Mistakes to Avoid
- -Dividing instead of multiplying when markets improve
- -Adding a flat dollar amount instead of calculating the percentage of the full price
- -Forgetting to make any time adjustment when using older comparable sales
Concept Deep Dive
Analysis
This question tests the fundamental appraisal concept of time adjustments in the sales comparison approach. When using comparable sales that occurred at different times, appraisers must adjust those sale prices to reflect current market conditions at the time of the appraisal. Market appreciation or depreciation affects property values over time, so historical sales data must be mathematically adjusted to be meaningful for current valuation purposes. The adjustment involves multiplying the original sale price by a factor that reflects the percentage change in market conditions since the sale occurred.
Background Knowledge
Time adjustments are essential in the sales comparison approach because comparable sales rarely occur on the same date as the appraisal. Market conditions constantly change due to economic factors, interest rates, supply and demand, and other influences that affect property values over time.
Real-World Application
An appraiser valuing a home in March 2024 finds a comparable sale from September 2023 for $400,000, but local market data shows 4% appreciation since then. The appraiser adjusts: $400,000 × 1.04 = $416,000 for current comparison.
More Sales Comparison Questions
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