A subject property is 10% superior to a comparable sale in location. The comparable sold for $300,000. What adjustment should be made to the comparable?
Correct Answer
A) +$30,000
When the subject is superior to the comparable, an upward adjustment is made to the comparable. 10% of $300,000 = $30,000. The adjusted value of the comparable becomes $330,000.
Why This Is the Correct Answer
Option A is correct because when the subject property is superior to the comparable, we must make an upward (positive) adjustment to the comparable to account for this difference. The subject being 10% superior in location means the comparable would have sold for 10% more if it had the same superior location as the subject. Therefore, we add $30,000 (10% of $300,000) to the comparable's sale price, making the adjustment +$30,000. This brings the adjusted value of the comparable to $330,000, which better reflects what a property with the subject's superior location characteristics would sell for.
Why the Other Options Are Wrong
Option B: -$30,000
Option B is wrong because a negative adjustment (-$30,000) would be used when the subject is inferior to the comparable, not superior. If we subtracted $30,000, we would be saying the comparable should be worth less, which contradicts the fact that the subject has a superior location. This would result in an adjusted comparable value of $270,000, which undervalues the location advantage that the subject possesses.
Option C: +$270,000
Option C is wrong because +$270,000 represents an incorrect calculation and an unreasonably large adjustment. This appears to be the result of subtracting the 10% ($30,000) from the sale price ($300,000) rather than using it as the adjustment amount. A $270,000 adjustment would suggest the location difference is worth 90% of the property's value, which is not realistic and misunderstands how percentage adjustments work in appraisal.
Option D: No adjustment needed
Option D is wrong because when there are differences between the subject and comparable properties, adjustments are necessary to account for these differences. The 10% superiority in location is a significant difference that affects value and cannot be ignored. Making no adjustment would mean treating the properties as equivalent when they clearly are not, leading to an inaccurate valuation of the subject property.
SUBJECT SUPERIOR = ADD UP
Remember 'SUBJECT SUPERIOR = ADD UP' - when the Subject is Superior, you ADD (positive adjustment) to bring the comparable UP to the subject's level. Think of it as lifting the comparable up to match the subject's better qualities.
How to use: When you see a question about adjustments, first identify whether the subject is superior or inferior to the comparable. If superior, immediately think 'ADD UP' and look for the positive adjustment option. Calculate the percentage of the comparable's sale price and add it.
Exam Tip
Always read carefully to identify which property (subject or comparable) has the superior characteristic, then remember that adjustments are made TO the comparable. If you're unsure about direction, think: 'What would the comparable have sold for if it had the subject's characteristics?'
Common Mistakes to Avoid
- -Confusing the direction of adjustment - making downward adjustments when upward adjustments are needed
- -Applying the adjustment to the subject property instead of the comparable property
- -Calculating the adjustment incorrectly by using 90% instead of 10% or misunderstanding percentage calculations
Concept Deep Dive
Analysis
This question tests the fundamental concept of adjustments in the sales comparison approach, specifically the direction and magnitude of adjustments when comparing properties. The key principle is that adjustments are always made TO the comparable property to make it more like the subject property. When the subject is superior to the comparable in any characteristic, the comparable must be adjusted upward to reflect what it would have sold for if it had the same superior characteristic as the subject. The adjustment amount is calculated as a percentage of the comparable's sale price, and the direction depends on whether the subject is superior (upward adjustment) or inferior (downward adjustment) to the comparable.
Background Knowledge
In the sales comparison approach, adjustments are made to comparable sales to account for differences between the comparables and the subject property. The goal is to estimate what each comparable would have sold for if it were identical to the subject property. Adjustments are always made TO the comparable, never to the subject, and the direction depends on whether the subject is superior (upward adjustment) or inferior (downward adjustment) to the comparable in each characteristic.
Real-World Application
In practice, appraisers constantly make location adjustments when comparable sales are in slightly different neighborhoods or have different proximity to amenities, schools, or transportation. A property near excellent schools might command a 5-15% premium over similar properties in areas with average schools, requiring upward adjustments to comparables in less desirable school districts.
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