An appraiser is analyzing three comparable sales with the following data: Sale 1: $350,000 with +$10,000 adjustments; Sale 2: $340,000 with -$5,000 adjustments; Sale 3: $360,000 with -$15,000 adjustments. What are the adjusted sale prices?
Correct Answer
D) Sale 1: $360,000; Sale 2: $335,000; Sale 3: $345,000
Why this is correct: Adjusted sale price = Sale Price + Adjustment. A positive adjustment is added; a negative adjustment is subtracted. Sale 1: 350000 + 10000 = 360000. Sale 2: 340000 + (-5000) = 335000. Sale 3: 360000 + (-15000) = 345000. Why the other choices are wrong: Option A incorrectly adds the adjustment for Sale 3. Option B incorrectly subtracts the positive adjustment from Sale 1. Option C shows the unadjusted prices, ignoring the adjustments. Exam tip: Remember the formula: Adjusted Price = Sale Price +/- Adjustment. The sign of the adjustment matters.
Why This Is the Correct Answer
Option A correctly applies the adjustment calculations by performing simple arithmetic operations on each sale price. Sale 1 receives a positive $10,000 adjustment, indicating the comparable is inferior to the subject, so $350,000 + $10,000 = $360,000. Sale 2 has a negative $5,000 adjustment, meaning the comparable is superior to the subject, so $340,000 - $5,000 = $335,000. Sale 3 also has a negative adjustment of $15,000, so $360,000 - $15,000 = $345,000. The calculations are straightforward and follow standard appraisal adjustment methodology.
Why the Other Options Are Wrong
PASS Method
PASS: Positive Add, Subtract Subtract. When you see a positive adjustment, ADD it to the sale price. When you see a negative adjustment (subtract sign), SUBTRACT it from the sale price.
How to use: When you encounter adjustment problems, immediately identify whether each adjustment is positive or negative, then apply PASS: positive adjustments get added, negative adjustments get subtracted from the original sale price.
Exam Tip
Always double-check your arithmetic and pay careful attention to positive and negative signs in adjustment calculations. Write out each calculation step-by-step to avoid simple mathematical errors.
Common Mistakes to Avoid
- -Confusing the direction of adjustments (adding negatives instead of subtracting)
- -Forgetting to apply adjustments altogether
- -Reversing the adjustment logic by thinking about adjusting the subject instead of the comparable
Concept Deep Dive
Analysis
This question tests the fundamental concept of applying adjustments in the sales comparison approach, which is one of the three primary valuation methods in real estate appraisal. Adjustments are made to comparable sales to account for differences between the comparable properties and the subject property being appraised. The process involves adding positive adjustments (when the comparable is inferior to the subject) and subtracting negative adjustments (when the comparable is superior to the subject). Understanding how to correctly calculate adjusted sale prices is crucial for determining an accurate indication of value for the subject property.
Background Knowledge
The sales comparison approach requires adjustments to comparable sales to reflect differences in features, location, condition, and other factors compared to the subject property. Positive adjustments indicate the comparable is inferior to the subject in some aspect, while negative adjustments indicate the comparable is superior to the subject.
Real-World Application
In practice, appraisers make adjustments for differences like square footage, lot size, condition, location, and amenities. For example, if a comparable has a pool but the subject doesn't, the appraiser would make a negative adjustment to the comparable's sale price to account for this superior feature.
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