A property sold for $750,000 but required $25,000 in seller concessions. For appraisal purposes, the adjusted sale price should be:
Correct Answer
C) $725,000
Why this is correct: Seller concessions (e.g., paying buyer's closing costs) effectively reduce the net price paid by the buyer. For a comparable sale adjustment, the price is adjusted to reflect the true economic consideration: contract price minus concessions. Why the other choices are wrong: The information given is sufficient to calculate the adjustment. $775,000 would be adding the concession, which is incorrect. Keeping it at $750,000 ignores the concession's impact on net price. Exam tip: Concessions are a cash-equivalent adjustment. Deduct seller-paid concessions from the sale price to get the adjusted price.
Why This Is the Correct Answer
Option B ($725,000) correctly represents the adjusted sale price after accounting for seller concessions. The calculation is straightforward: contract price ($750,000) minus seller concessions ($25,000) equals the net effective price paid by the buyer ($725,000). This adjusted figure reflects the true economic transaction and should be used when analyzing this sale as a comparable for appraisal purposes. Using this adjusted price ensures accurate market analysis and prevents overvaluation of the subject property.
Why the Other Options Are Wrong
SUBTRACT Seller Concessions
Remember 'SUBTRACT' - Seller concessions are Subtracted from the Buyer's Total Recorded Agreement Contract Total to get the true economic value exchanged.
How to use: When you see seller concessions in a question, immediately think 'SUBTRACT' and deduct the concession amount from the stated sale price to find the adjusted sale price for appraisal purposes.
Exam Tip
Always look for mentions of seller concessions, closing cost assistance, or seller credits in sale transactions and remember to subtract these amounts from the gross sale price.
Common Mistakes to Avoid
- -Adding concessions to the sale price instead of subtracting
- -Ignoring concessions entirely and using the gross contract price
- -Confusing seller concessions with buyer incentives or separate repair credits
Concept Deep Dive
Analysis
This question tests understanding of how seller concessions affect the adjusted sale price in real estate appraisal. Seller concessions represent financial assistance provided by the seller to the buyer, which effectively reduces the net amount the buyer pays for the property. For appraisal purposes, the adjusted sale price must reflect the true economic value exchanged, not just the contract price. This adjustment ensures that comparable sales data accurately represents market value and prevents inflated valuations that could result from ignoring concessions.
Background Knowledge
Seller concessions are financial contributions made by the seller to assist the buyer with closing costs, repairs, or other expenses related to the purchase. In appraisal practice, these concessions must be subtracted from the gross sale price to determine the net effective price paid, which represents the true market value indicator for comparable sales analysis.
Real-World Application
In practice, appraisers regularly encounter sales with concessions ranging from 2-6% of the sale price. These must be adjusted when using sales as comparables to ensure accurate valuation of the subject property and prevent inflated appraisals that could harm lenders and buyers.
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