An appraiser makes the following adjustments to a comparable sale: +$5,000 for lot size, -$3,000 for condition, +$2,000 for garage. If the comparable sold for $285,000, what is the adjusted sale price?
Correct Answer
D) $289,000
Why this is correct: Calculate the net adjustment: +5,000 (lot size) + (-3,000) (condition) + (+2,000) (garage) = +4,000. Add the net adjustment to the comparable's sale price: 285,000 + 4,000 = 289,000. Why the other choices are wrong: '$295,000' results from adding all adjustments as positives (5k+3k+2k). '$281,000' results from subtracting the net adjustment. '$275,000' results from a significant miscalculation. Exam tip: Net adjustment = sum of all adjustments. Adjusted price = Sale price + Net adjustment. Watch the plus/minus signs.
Why This Is the Correct Answer
Option A is correct because it properly calculates the net adjustment and applies it to the sale price. The calculation is: +$5,000 (lot size) - $3,000 (condition) + $2,000 (garage) = +$4,000 net adjustment. This positive net adjustment is then added to the original sale price of $285,000, resulting in an adjusted sale price of $289,000. This follows the standard methodology for adjusting comparable sales in real estate appraisal.
Why the Other Options Are Wrong
Option A: $295,000
Option A ($295,000) is incorrect because it appears to add all the adjustment amounts as positive values without considering the negative condition adjustment. This would result from calculating $285,000 + $5,000 + $3,000 + $2,000 = $295,000, ignoring the negative sign.
Option B: $281,000
Option B ($281,000) is incorrect because it represents subtracting the net adjustment from the sale price instead of adding it. This would result from calculating $285,000 - $4,000 = $281,000, which reverses the proper application of the adjustment.
Option C: $275,000
Option C ($275,000) is incorrect because it treats all adjustments as negative, subtracting the total absolute value of adjustments from the sale price. This would result from calculating $285,000 - $10,000 = $275,000, which misapplies the directional nature of adjustments.
SNAP Method
SNAP: Sign, Net, Add, Price. First check the Sign of each adjustment (+ or -), calculate the Net adjustment by combining all adjustments algebraically, then Add the net adjustment to the original sale Price.
How to use: When you see adjustment problems, immediately write 'SNAP' and work through each step: identify all signs, calculate the net adjustment, then add to the original price. This prevents sign errors and ensures systematic calculation.
Exam Tip
Always write out the adjustment calculation step-by-step on your scratch paper, being careful to maintain the positive and negative signs. Double-check your arithmetic before selecting your answer.
Common Mistakes to Avoid
- -Forgetting to apply the correct positive or negative signs to adjustments
- -Subtracting the net adjustment instead of adding it when the net is positive
- -Adding all adjustment amounts as positive values regardless of their actual signs
Concept Deep Dive
Analysis
This question tests the fundamental concept of adjusting comparable sales in the sales comparison approach to appraisal. When using comparable sales, appraisers must adjust for differences between the comparable property and the subject property to arrive at an indicated value. Each adjustment reflects how much more or less the comparable would have sold for if it had the same characteristics as the subject property. The process involves calculating the net adjustment by adding positive adjustments and subtracting negative adjustments, then applying this net figure to the original sale price.
Background Knowledge
In the sales comparison approach, adjustments are made to comparable sales to account for differences between the comparable and subject property. Positive adjustments indicate the comparable is inferior to the subject in that aspect, while negative adjustments indicate the comparable is superior to the subject.
Real-World Application
In practice, appraisers make numerous adjustments for factors like square footage, age, condition, location, and amenities. Each adjustment must be supported by market data and applied consistently across all comparables to ensure reliable value indications.
More Sales Comparison Questions
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?
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