Comparable 1 sold for $300,000 with adjustments of +$12,000 and −$8,000. Comparable 2 sold for $310,000 with a single −$9,000 adjustment. Using absolute gross adjustment as a percentage of sale price, which sale is the better comparability guide, and why?
Correct Answer
D) Comparable 2, as its gross adjustment is 2.9% versus 6.7%
Absolute gross adjustment sums adjustments without regard to sign: Comparable 1 is $20,000 ÷ $300,000 = 6.7%; Comparable 2 is $9,000 ÷ $310,000 = 2.9%. The lower percentage indicates greater comparability. Net adjustment hides offsetting differences.
Why This Is the Correct Answer
Option D is correct because Comparable 1's gross adjustment is $12,000 + $8,000 = $20,000, and $20,000 ÷ $300,000 is about 6.7%. Comparable 2's gross adjustment is $9,000, and $9,000 ÷ $310,000 is about 2.9%. The lower percentage indicates that Comparable 2 is the more comparable sale.
Why the Other Options Are Wrong
Option A: Comparable 1, because its net adjustment is just +$4,000
Option A favors Comparable 1 because its net adjustment is just +$4,000 (12,000 − 8,000). Net adjustment lets offsetting differences cancel, so it hides the $20,000 of total adjusting that Comparable 1 needed.
Option B: Comparable 1, because its gross adjustment is 1.3% of price
Option B claims Comparable 1's gross adjustment is 1.3% of price, but 1.3% comes from the net figure: $4,000 ÷ $300,000. The true gross percentage is $20,000 ÷ $300,000, about 6.7%.
Option C: Comparable 2, because it required a single adjustment
Option C picks Comparable 2 because it required a single adjustment. Counting adjustments is not the stated test: one large adjustment can outweigh several small ones. Comparable 2 is the better guide because $9,000 ÷ $310,000 is about 2.9%, versus $20,000 ÷ $300,000, about 6.7%, for Comparable 1.
Least adjusted, most trusted
The comparable with the smallest gross adjustment percentage usually earns the most weight in reconciliation.
How to use: Use this when ranking comparables by how much adjustment each one required.
Exam Tip
When a question says gross, add all adjustments as positive numbers before dividing by the sale price.
Common Mistakes to Avoid
- -Using net adjustment to judge comparability
- -Dividing the net amount by price and calling it gross
- -Judging comparability by the number of adjustments rather than their size
Concept Deep Dive
Analysis
This question tests the use of absolute gross adjustment as a percentage of sale price to judge comparability. Sum each comparable's adjustments without regard to sign, divide by its sale price, and compare. The sale with the lower percentage required less adjusting and is often the better guide.
Background Knowledge
Absolute gross adjustment is the sum of the absolute values of all adjustments made to a sale. Expressed as a percentage of sale price, it lets the appraiser compare how different each comparable is from the subject. The sale needing the lowest percentage is often the most comparable and is given the most weight.
Real-World Application
In reconciling three comparables, an appraiser notices one has a small net adjustment but large offsetting plus and minus items. Its gross percentage is the highest of the three, so the appraiser gives more weight to a sale with fewer, smaller adjustments.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
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