An appraiser who applies a $50 per square foot GLA adjustment in a market where paired sales support $70 will:
Correct Answer
C) Understate the adjustment and skew the indications
Why this is correct: The governing concept is that adjustments must reflect market evidence. Paired sales analysis indicates the market supports a $70 per square foot adjustment for GLA. Applying a lower rate of $50 fails to fully account for the property size difference, leaving a portion of the value difference uncorrected. This error systematically skews the adjusted values of the comparables, leading to unreliable value indications. Why the other choices are wrong: "Have no effect on the value conclusion" is wrong because an incorrect adjustment directly changes the adjusted sale prices of comparables. "Produce a more conservative and defensible result" is wrong; an unsupported adjustment is not conservative—it is an indefensible error. "Improve the grid's overall consistency" is wrong because using a rate not derived from the market data introduces inconsistency and reduces reliability. Exam tip: In adjustment questions, the correct adjustment is the one supported by the market data provided. An adjustment that is too high or too low is an error that skews results.
Why This Is the Correct Answer
Option C describes both effects: the adjustment is understated relative to the market evidence, and the resulting indications are skewed. Every comparable that differs in size carries residual error proportional to that difference, so the closer the comparable is in size the smaller the damage and the farther away the worse it gets. Because the appraiser had support for $70 and used something else, the grid also lacks a defensible basis for the number that was applied.
Why the Other Options Are Wrong
Option A: Have no effect on the value conclusion
An adjustment changes each comparable's adjusted sale price directly, so a wrong rate changes the indications and therefore the reconciled conclusion. The only way the conclusion would be unaffected is if no comparable differed in living area, which is not the situation described. This choice treats the grid as decorative rather than analytical.
Option B: Produce a more conservative and defensible result
Understating an adjustment is not conservatism; it is an unsupported deviation from the evidence. Conservatism is not a recognized substitute for market support, and a smaller number is not automatically the safer number, since the direction of the error depends on whether comparables are larger or smaller than the subject. Defensibility comes from support, not from modesty.
Option D: Improve the grid's overall consistency
Consistency means applying the same market-derived rate uniformly across the grid, not applying any single number everywhere. Using an unsupported rate consistently only makes the same error repeatedly. The grid looks tidy while every adjusted price carries the same built-in distortion.
The Market Sets the Rate
The market, not the appraiser, sets the size of an adjustment. If the evidence says seventy, seventy goes in the grid; anything else is the appraiser substituting judgment for data.
How to use: When a stem hands you a supported figure and shows the appraiser using a different one, the answer describes an error, and the only question left is what kind. Look for the option naming both the understatement and the distortion.
Exam Tip
Reject the word conservative when it appears as a justification. Conservatism is not a standard, and options that praise a smaller unsupported number are distractors.
Common Mistakes to Avoid
- -Applying a rule-of-thumb adjustment rate instead of the one the data support
- -Assuming a smaller adjustment is safer because it moves the value less
- -Failing to reconcile the applied rate with the exhibit that supposedly supports it
Concept Deep Dive
Analysis
An adjustment exists to remove a difference between a comparable and the subject so the comparable's price speaks to the subject. Its size must come from market evidence, and here the evidence says the market reacts at $70 per square foot of living area. Using $50 leaves $20 of every square foot of difference uncorrected, and because size differences run in both directions across a grid, the error pushes larger comparables' adjusted prices too high and smaller ones too low. The distortion is systematic rather than random, so it does not wash out across the grid; it widens the spread of adjusted indications and undermines the reconciliation that follows.
Background Knowledge
You need to know that adjustments are derived from market evidence such as paired sales, regression, or cost with market recognition, and that they are applied to the comparables to make them equivalent to the subject. You also need to see how an error in an adjustment rate propagates into the adjusted sale prices and the reconciliation.
Real-World Application
A reviewer recalculates a residential grid using the appraiser's own paired-sales exhibit and finds the applied living-area rate is well below the exhibit's indication, which alone is enough to send the report back for correction.
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