An appraiser uses paired sales analysis to estimate an adjustment for a 3-car garage versus a 2-car garage. Four valid pairs are identified, each controlling for age, condition, and location. The observed price premiums are: $11,200, $13,800, $9,400, and $14,600. The appraiser excludes the $9,400 observation because it involved a property with unusually high custom finishes that likely inflated the garage premium beyond typical market reaction. What is the resulting paired-sales adjustment, rounded to the nearest $100, and which USPAP provision justifies the exclusion?
Correct Answer
A) $13,200; Standards Rule 1-4(c) — adjustments must reflect typical market behavior
Excluding the $9,400 observation leaves three values: $11,200, $13,800, $14,600. Their average is ($11,200 + $13,800 + $14,600) ÷ 3 = $39,600 ÷ 3 = $13,200. Rounding to nearest $100 gives $13,200. The exclusion is justified because the $9,400 observation reflects atypical conditions (custom finishes) that distort the isolated garage premium — inconsistent with the requirement in Standards Rule 1-4(c) that adjustments represent 'typical market behavior' for the feature being analyzed. While Rule 1-4(b) mandates market support, Rule 1-4(c) specifically addresses the need for adjustments to reflect typical, not anomalous, reactions — making A the most precise citation.
Why This Is the Correct Answer
Dropping the excluded pair leaves $11,200, $13,800, and $14,600, which total $39,600 and average $13,200, already at an even hundred. That figure appears in only two options, so the choice comes down to the stated justification, and the governing principle is that an adjustment must represent typical market behavior for the element being isolated rather than an anomalous reaction. Read the option for that principle rather than for its subsection label, because the lettered subparts of the development rule on approaches designate the sales comparison, cost, and income approaches rather than free-standing adjustment doctrines. Whatever the label, the reason for exclusion has to be documented and market-based.
Why the Other Options Are Wrong
Option B: $13,200; Standards Rule 2-2(a) — extraordinary assumptions require disclosure
The arithmetic in this option is right but the justification is unrelated. Extraordinary assumptions concern uncertain facts the appraiser accepts as true and must disclose, and the reporting rule cited deals with what a report must contain, not with which paired indication to discard. Setting aside a contaminated data point is an analytical decision, not an assumption about the property.
Option C: $12,700; Standards Rule 1-5 — reconciliation must consider reliability of data
This option fails first on arithmetic: $12,700 is neither the mean of the three retained pairs, $13,200, nor the mean of all four, $12,250, nor their median. The rule cited is also mismatched, since reconciliation of the value indications and the analysis of data reliability are addressed elsewhere in the development standard. A wrong number with a plausible-sounding rule is a standard distractor pattern.
Option D: $12,700; Standards Rule 1-4(b) — adjustments must be supported by market data
Requiring market support for adjustments is a true statement of appraisal doctrine, which is what makes this option tempting, but it is attached to the wrong number. Once the excluded pair is removed, no reconciliation of the remaining three indications produces $12,700. When the arithmetic fails, the citation cannot save the option.
Drop It, Then Divide
Two steps in order. First DROP the pair the stem tells you to exclude, then DIVIDE what remains. Candidates who divide before dropping land on the distractor every time.
How to use: Cross out the excluded figure on your scratch paper before touching the calculator, then compute the mean of the survivors and match it against the options before you even read the citations.
Exam Tip
When two options share a number and differ only in the rule cited, solve the math first to cut the field in half, then choose based on which principle actually addresses the action taken.
Common Mistakes to Avoid
- -Averaging all indications including the one the analysis excluded
- -Discarding a pair because it is inconvenient rather than because it is contaminated
- -Trusting a subsection number in an answer choice instead of testing the principle it states
Concept Deep Dive
Analysis
Two skills are being graded at once: the arithmetic of reconciling paired-sales indications and the principle that governs discarding one of them. Paired sales isolate the market's reaction to a single element of comparison by matching sales that are alike in every other respect, so an indication contaminated by another difference is not measuring the element you care about. When a pair is set aside, the appraiser must be able to state the analytical reason and keep it in the workfile; the removal is a judgment about data reliability, not a convenience. The surviving indications are then reconciled, most often by weighting or averaging, into the single adjustment the grid will use.
Background Knowledge
You need to know how paired sales analysis isolates a single element of comparison and why contaminated pairs are set aside with documented reasoning. You also need to be able to reconcile several indications into one adjustment and to keep straight what the development standard actually requires, since exam options often attach real principles to invented subsection numbers.
Real-World Application
An appraiser building a garage adjustment finds four pairs, discovers one involves a house with a finished garage interior and custom cabinetry, notes that the pair measures more than garage bays, and documents the exclusion in the workfile before averaging the rest.
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