A 2200-sqft comparable sold for $440,000. The subject has 2000 sqft. Consistent measurement and market evidence support a marginal $75/sqft adjustment for this difference, with no other adjustments. What adjusted comparable price results?
Correct Answer
D) $425,000
440000 + (2000 − 2200) × 75 = 425000. Subtract the supported contribution of the comparable’s excess area; a total-price-per-area average is not used.
Why This Is the Correct Answer
Option D is correct because the size difference is 2,000 - 2,200 = -200 square feet, and -200 x $75 = -$15,000. Subtracting this from the comparable's $440,000 price gives $425,000. The comparable is superior in size, so its price is reduced.
Why the Other Options Are Wrong
Option A: $440,000
Option A, $440,000, leaves the comparable's price unadjusted. The stem states a supported $75 per square foot adjustment for a 200 square foot difference, so a $15,000 downward adjustment applies: $440,000 - $15,000 = $425,000.
Option B: $455,000
Option B, $455,000, adds the $15,000 (200 x $75) instead of subtracting it. Because the comparable is larger than the subject, the adjustment is downward: $440,000 - $15,000 = $425,000.
Option C: $290,000
Option C, $290,000, applies the $75 rate to the subject's entire 2,000 square feet ($440,000 - 2,000 x $75 = $290,000) rather than to the 200 square foot difference. The correct adjustment is 200 x $75 = $15,000, giving $425,000.
Comp better, subtract; comp worse, add
If the comparable has more of a feature than the subject, take that contribution away from its price. If it has less, add it.
How to use: Use this to set the direction of each adjustment in a sales grid.
Exam Tip
Multiply the rate by the difference in area only, then decide direction by asking whether the comparable is better or worse than the subject.
Common Mistakes to Avoid
- -Adjusting in the wrong direction for a larger comparable
- -Multiplying the rate by the total area instead of the difference
- -Using the comparable's overall price per square foot as the adjustment rate
Concept Deep Dive
Analysis
This question tests a size adjustment using a market-supported marginal rate. The comparable is 200 square feet larger than the subject, so its price is adjusted downward by 200 x $75. The adjustment is made to the comparable, not the subject.
Background Knowledge
Adjustments are made to the comparable's price to show what it would have sold for if it had the subject's characteristics. A marginal size rate measures the contribution of additional area, which is typically lower than the comparable's overall price per square foot, so the overall average is not used as the adjustment rate.
Real-World Application
An appraiser finds through paired sales that extra living area adds about $75 per square foot in a neighborhood where homes sell for about $200 per square foot overall. A comparable 200 square feet larger than the subject is adjusted down by $15,000.
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