An appraiser is completing a URAR and needs to calculate the gross living area adjustment. The subject has 1,800 sq ft, and a comparable has 1,650 sq ft and sold for $275,000. Market analysis indicates $85 per sq ft for size differences. What adjustment should be made?
Correct Answer
A) +$12,750
The comparable is 150 sq ft smaller than the subject (1,800 - 1,650 = 150). Since the comparable is smaller, it needs a positive adjustment: 150 × $85 = $12,750. The adjustment is +$12,750.
Why This Is the Correct Answer
Option A is correct because the comparable property has 150 square feet less living area than the subject property (1,800 - 1,650 = 150). Since the comparable is smaller and therefore inferior to the subject, it needs a positive adjustment to compensate for this deficiency. The calculation is 150 sq ft × $85 per sq ft = $12,750, and since we're adjusting the comparable upward to match the subject's superior size, the adjustment is +$12,750.
Why the Other Options Are Wrong
Option B: -$12,750
Option B is wrong because it shows a negative adjustment of $12,750. A negative adjustment would be used if the comparable were superior to the subject (larger), but in this case the comparable is smaller than the subject, so it needs a positive adjustment to compensate for its deficiency.
Option C: +$15,300
Option C is wrong because while it correctly shows a positive adjustment, the calculation is incorrect. The difference is 150 sq ft, not 180 sq ft. This appears to be a calculation error (180 × $85 = $15,300), but the actual difference between the properties is only 150 sq ft.
Option D: -$15,300
Option D is wrong for two reasons: it shows a negative adjustment when a positive adjustment is needed, and it uses an incorrect calculation of $15,300 instead of the correct $12,750 based on the 150 sq ft difference.
The COMPASS Rule
COMPASS: Comparable Opposite, Make Positive Adjustments for Smaller Size. When the comparable is opposite (inferior) to the subject, make positive adjustments. For size specifically, smaller comparables get positive adjustments.
How to use: When you see a GLA adjustment question, immediately identify which property is larger. If the comparable is smaller, think 'COMPASS' - the comparable needs a positive adjustment to compensate for being smaller than the subject.
Exam Tip
Always write down 'Subject - Comparable = Difference' first, then determine if the comparable is superior (+) or inferior (-) to decide the adjustment direction. Remember: inferior comparable gets positive adjustment, superior comparable gets negative adjustment.
Common Mistakes to Avoid
- -Confusing the direction of adjustment - making negative adjustments when positive is needed
- -Calculating the square footage difference incorrectly by using wrong property measurements
- -Applying the adjustment to the subject property instead of the comparable property
Concept Deep Dive
Analysis
This question tests the fundamental principle of making adjustments in the sales comparison approach when completing a Uniform Residential Appraisal Report (URAR). The appraiser must determine whether the comparable property needs a positive or negative adjustment based on how it differs from the subject property. The key concept is that adjustments are always made TO the comparable property to make it more similar to the subject property. When a comparable is inferior to the subject (smaller in this case), it receives a positive adjustment to account for what it lacks compared to the subject.
Background Knowledge
In the sales comparison approach, adjustments are made to comparable properties to account for differences between them and the subject property. The fundamental rule is that adjustments are always made TO the comparable, not to the subject. If a comparable is inferior to the subject in any aspect, it receives a positive adjustment; if superior, it receives a negative adjustment.
Real-World Application
In practice, appraisers regularly make GLA adjustments when comparable sales have different square footage than the subject property. This is one of the most common and significant adjustments in residential appraisal, as living area directly impacts property value and market appeal to buyers.
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