An appraiser is completing a URAR and needs to calculate a gross living area adjustment. The subject has 2,400 sq ft and a comparable sold for $350,000 with 2,200 sq ft. If the market indicates $75 per square foot for living area differences, what adjustment should be applied?
Correct Answer
A) +$15,000
The subject has 200 sq ft more than the comparable (2,400 - 2,200 = 200). At $75 per sq ft, the comparable needs a +$15,000 adjustment (200 × $75) to account for having less living area than the subject.
Why This Is the Correct Answer
Option A is correct because the comparable has 200 square feet less than the subject (2,400 - 2,200 = 200). Since the comparable is inferior in this aspect, it needs a positive adjustment to account for what it would have sold for with the additional square footage. The calculation is 200 sq ft × $75/sq ft = +$15,000. This positive adjustment increases the comparable's adjusted sale price to better match the subject's characteristics.
Why the Other Options Are Wrong
Option B: +$30,000
This option incorrectly uses +$30,000, which would result from miscalculating the square footage difference as 400 sq ft instead of 200 sq ft, or doubling the correct adjustment amount.
Option C: -$15,000
This option has the correct dollar amount ($15,000) but the wrong sign (negative instead of positive), indicating a fundamental misunderstanding of adjustment direction - the comparable should be adjusted upward, not downward.
Option D: -$30,000
This option combines both errors: wrong adjustment direction (negative instead of positive) and wrong calculation amount ($30,000 instead of $15,000).
COMPASS Method
COmparable Minus Subject = Positive Adjustment, Subject minus COmparable = Negative Adjustment. Remember: 'If the COmparable is worse (less), add more (+). If the SUbject is worse (less), SUbtract (-)'
How to use: When you see an adjustment question, immediately identify which property has more of the characteristic, then apply COMPASS: if comparable has less than subject, the adjustment is positive; if subject has less than comparable, the adjustment is negative.
Exam Tip
Always double-check your adjustment direction by asking: 'What would the comparable have sold for if it had the same characteristics as the subject?' If it would have sold for more, use a positive adjustment.
Common Mistakes to Avoid
- -Confusing adjustment direction (making adjustments to subject instead of comparable)
- -Calculating square footage difference incorrectly
- -Applying negative adjustment when positive is needed or vice versa
Concept Deep Dive
Analysis
This question tests the fundamental concept of making adjustments in the sales comparison approach when completing a Uniform Residential Appraisal Report (URAR). The key principle is that adjustments are always made TO the comparable property to make it more similar to the subject property. When a comparable has less gross living area than the subject, it must be adjusted upward to reflect what it would have sold for if it had the same square footage as the subject. The direction and magnitude of the adjustment depends on which property (subject or comparable) has the superior characteristic.
Background Knowledge
In the sales comparison approach, adjustments are made TO comparable sales to make them more similar to the subject property. When a comparable is inferior to the subject in any characteristic, it receives a positive adjustment; when superior, it receives a negative adjustment.
Real-World Application
In practice, appraisers regularly make gross living area adjustments when comparable sales have different square footages than the subject property. Market-derived adjustment amounts per square foot are typically developed through paired sales analysis or regression analysis of recent sales data.
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