Market evidence supports a 2% upward market-conditions adjustment based on the comparable’s cash-equivalent $450,000 price. Apply only that supported difference. What adjusted price results?
Correct Answer
C) $459,000
450000 × (1 + 0.02) = 459000. The percentage base is explicitly the original comparable price; the percentage and its dollar amount are different quantities.
Why This Is the Correct Answer
Option C is correct because a 2% upward adjustment on the $450,000 base gives $450,000 × (1 + 0.02) = $459,000. The dollar amount of the adjustment is $9,000, which is added to the original price.
Why the Other Options Are Wrong
Option A: $450,000
Option A, $450,000, is the original comparable price with no adjustment applied. It ignores the supported 2% upward market-conditions change; the correct result is $450,000 × 1.02 = $459,000.
Option B: $441,000
Option B, $441,000, results from subtracting 2% ($450,000 × 0.98), which applies the adjustment in the wrong direction. The market evidence supports an upward change, so the result is $450,000 × 1.02 = $459,000.
Option D: $9,000
Option D, $9,000, is only the dollar amount of the 2% adjustment ($450,000 × 0.02), not the adjusted price. Adding it to the base gives $450,000 + $9,000 = $459,000.
Base times one plus rate
For an upward percentage adjustment, multiply the base by (1 + rate); for a downward one, multiply by (1 − rate).
How to use: Use it on any percentage adjustment question to get the adjusted price in one step instead of stopping at the dollar amount.
Exam Tip
Check whether the question asks for the adjustment amount or the adjusted price. Both usually appear among the choices.
Common Mistakes to Avoid
- -Reporting the dollar adjustment instead of the adjusted price
- -Applying the percentage in the wrong direction
- -Making a time adjustment without market support
Concept Deep Dive
Analysis
This question tests applying a percentage market-conditions adjustment to a stated base. The base is the comparable's original cash-equivalent price, and the adjustment is upward. Multiply the base by one plus the percentage to get the adjusted price, keeping the percentage, its dollar amount and the final price distinct.
Background Knowledge
A market-conditions (time) adjustment accounts for price changes between a comparable's sale date and the effective date of value. Such adjustments, or the lack of them, need support from evidence, for example repeat sales of the same property over time. When a percentage is applied to a single stated base, it works like simple interest on that original amount.
Real-World Application
An appraiser finds that resales of the same homes in a subdivision show prices rising over the months since a comparable closed. The appraiser applies a supported percentage time adjustment to the comparable's price and explains the evidence in the report.
More Sales Comparison Questions
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