A supported market trend is +0.4% per month. A comparable sold for $350,000 nine months before the effective date. Using a simple (non-compounded) rate on the sale price, what is the time-adjusted price?
Correct Answer
B) $362,600
Nine months × 0.4% = 3.6%; $350,000 × 1.036 = $362,600. Applying one month only gives $351,400, using 4% gives $364,000, and adjusting downward gives $337,400.
Why This Is the Correct Answer
Option B is correct because nine months at 0.4% per month is a 3.6% increase. Applying it simply to the sale price gives $350,000 × 1.036 = $362,600.
Why the Other Options Are Wrong
Option A: $351,400
Option A, $351,400, applies only one month of change: $350,000 × 1.004. The sale was nine months before the effective date, so the full change is 9 × 0.4% = 3.6%, giving $362,600.
Option C: $364,000
Option C, $364,000, rounds the 3.6% change up to 4%: $350,000 × 1.04. The correct factor is 1.036, giving $362,600.
Option D: $337,400
Option D, $337,400, adjusts downward: $350,000 × (1 − 0.036). Because prices rose after the sale, the comparable's price must be raised, so the result is $350,000 × 1.036 = $362,600.
Rate times months, then multiply
For a simple time adjustment, multiply the monthly rate by the months first, then apply that total percentage to the sale price.
How to use: Use this on any simple-rate time adjustment question.
Exam Tip
Confirm the direction of the market before choosing; a rising market pushes the older sale's price up.
Common Mistakes to Avoid
- -Applying only one month of change
- -Rounding the total percentage before applying it
- -Adjusting downward in a rising market
Concept Deep Dive
Analysis
This question tests a simple monthly market conditions adjustment. Multiply the monthly rate by the number of months to get the total change, then apply it to the sale price. Since the market rose after the sale, the adjustment is upward.
Background Knowledge
The market conditions adjustment is typically stated as a percentage change in value per time period, such as per month or per year. With a simple rate, the total change is the rate times the number of periods applied to the original price. The direction depends on whether the market rose or fell between the sale and the effective date.
Real-World Application
An appraiser has resale data supporting a 0.4% monthly increase in a suburban market. A comparable that closed nine months before the effective date is adjusted upward by 3.6% so it reflects current market conditions.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
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Previous Question
Comparable 1 sold for $300,000 with adjustments of +$12,000 and −$8,000. Comparable 2 sold for $310,000 with a single −$9,000 adjustment. Using absolute gross adjustment as a percentage of sale price, which sale is the better comparability guide, and why?
Next Question
A comparable sold eight months before the effective date for $300,000. Paired resales show prices rising 0.5% per month (simple, not compounded) over that period. What is the time-adjusted price?