An appraiser determines that a comparable sale requires a +$8,000 adjustment for square footage and a -$3,000 adjustment for condition. If the comparable sold for $285,000, what is the adjusted sale price?
Correct Answer
B) $290,000
The net adjustment is +$8,000 + (-$3,000) = +$5,000. Adding this to the sale price: $285,000 + $5,000 = $290,000. Positive adjustments are added when the comparable is inferior to the subject.
Why This Is the Correct Answer
Option B is correct because the calculation properly applies both adjustments to arrive at the net adjustment. The +$8,000 adjustment for square footage indicates the comparable has less square footage than the subject, so we add value to compensate. The -$3,000 adjustment for condition indicates the comparable is in better condition than the subject, so we subtract value. The net adjustment is +$8,000 + (-$3,000) = +$5,000, which when added to the $285,000 sale price equals $290,000.
Why the Other Options Are Wrong
Option A: $280,000
Option A incorrectly applies only the negative adjustment (-$3,000) to the sale price, resulting in $285,000 - $3,000 = $282,000, which doesn't even match this option exactly. This shows a fundamental misunderstanding of how to combine multiple adjustments.
Option C: $296,000
Option C incorrectly adds both adjustments as positive values ($8,000 + $3,000 = $11,000), then adds this to the sale price ($285,000 + $11,000 = $296,000). This ignores the negative sign on the condition adjustment and demonstrates a failure to understand that some adjustments reduce value.
Option D: $274,000
Option D incorrectly subtracts both adjustments from the sale price ($285,000 - $8,000 - $3,000 = $274,000), treating both as negative adjustments. This shows a complete misunderstanding of adjustment direction and fails to recognize that the square footage adjustment should be positive.
The COIN Method
COIN: Comparable's Obvious Inferiority = Net positive adjustment. When the comparable is obviously inferior (smaller, worse condition, etc.), you add money (positive) to bring it up to the subject's level. When superior, you subtract money (negative) to bring it down.
How to use: When you see adjustment problems, think COIN - identify if each comparable feature is inferior or superior to the subject, then add for inferior features and subtract for superior features. Calculate the net adjustment by combining all individual adjustments algebraically.
Exam Tip
Always write out the adjustment calculation step by step: identify each adjustment as positive or negative, calculate the net adjustment algebraically, then apply to the sale price. Double-check that positive adjustments correspond to inferior comparable features.
Common Mistakes to Avoid
- -Forgetting to combine adjustments algebraically before applying to sale price
- -Reversing the direction of adjustments (adding when should subtract)
- -Applying each adjustment separately to the original sale price instead of using net adjustment
Concept Deep Dive
Analysis
This question tests the fundamental concept of sales comparison adjustments in real estate appraisal. When using comparable sales, appraisers must adjust the sale prices to account for differences between the comparable property and the subject property. Positive adjustments are made when the comparable is inferior to the subject (meaning the comparable would have sold for more if it had the same features as the subject). Negative adjustments are made when the comparable is superior to the subject. The key is understanding that adjustments are always made TO the comparable to make it more like the subject property.
Background Knowledge
Sales comparison adjustments are made to comparable properties to account for differences with the subject property, with the goal of estimating what the comparable would have sold for if it were identical to the subject. The direction of adjustments depends on whether the comparable feature is superior (negative adjustment) or inferior (positive adjustment) to the subject property.
Real-World Application
In practice, appraisers make numerous adjustments for differences in location, size, condition, amenities, and market conditions. Each adjustment requires careful analysis and market support. The adjusted sale prices of multiple comparables help bracket the subject property's value range.
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