Comparable 2 sold for $415,000. A year before the sale, its owner added a full bath that the subject lacks; the bath would cost $30,000 to build today and shows 5% depreciation. The subject has a covered patio that the comparable lacks, with a depreciated cost of $6,000. Market data show buyers in this neighborhood pay about the depreciated cost of recent, well-built additions like these. What is the comparable's adjusted sale price?
Correct Answer
D) $392,500
The bath's depreciated cost is $30,000 x 0.95 = $28,500, and because the comparable has it the amount is deducted. The subject's patio makes the comparable inferior on that line, so $6,000 is added: $415,000 - $28,500 + $6,000 = $392,500. Using the bath's cost new gives $391,000, ignoring the patio gives $386,500, and deducting the patio gives $380,500.
Why This Is the Correct Answer
Option D is correct because the bath's depreciated cost is $30,000 x 0.95 = $28,500, deducted since the comparable has the bath. The patio belongs to the subject, so $6,000 is added to the comparable. $415,000 - $28,500 + $6,000 = $392,500.
Why the Other Options Are Wrong
Option A: $380,500
Option A, $380,500, deducts both items: $415,000 - $28,500 - $6,000. The comparable lacks the patio, so it is inferior on that line and the $6,000 is added, giving $392,500.
Option B: $386,500
Option B, $386,500, makes only the bath adjustment: $415,000 - $28,500. The subject's $6,000 patio also needs a plus adjustment to the comparable, for $392,500.
Option C: $391,000
Option C, $391,000, deducts the bath's $30,000 cost new: $415,000 - $30,000 + $6,000. The bath has 5% depreciation, so its cost basis is $28,500 and the result is $392,500.
Sign each line separately
Treat every feature as its own question: who has it? If the comparable has it, subtract; if the subject has it, add.
How to use: Use this on any grid with more than one adjustment.
Exam Tip
When two features point in opposite directions, write each signed amount before totaling. Check whether the cost given is new or already depreciated.
Common Mistakes to Avoid
- -Giving every adjustment the same sign
- -Using cost new for a feature that has some depreciation
- -Overlooking a feature the subject has and the comparable lacks
Concept Deep Dive
Analysis
The question applies cost analysis in a setting where it is reasonable: recent, well-built additions that buyers pay about depreciated cost for. The candidate must depreciate the bath, then apply two adjustments in opposite directions because the comparable is superior on one feature and inferior on the other.
Background Knowledge
Depreciated cost is most reasonable as an adjustment basis for new or recent, well-built features that fit the market, where buyers tend to pay close to cost. Each line of the grid is signed separately: minus where the comparable is superior, plus where it is inferior.
Real-World Application
An appraiser finds a comparable whose seller added a bath shortly before selling, while the subject has a covered patio. With no pairs available, the appraiser uses current depreciated costs that local agents confirm buyers pay, subtracting the bath and adding the patio.
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?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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An appraiser has two assignments for typical owner-occupied homes under Fannie Mae's Selling Guide. In Neighborhood A, bank-owned (REO) and short sales have made up nearly half of all sales for the past year and sell at prices in line with similar owner sales in the same condition. In Neighborhood B, such sales are under 3% of transactions, and the one recent REO sold well below the range after limited marketing. Which approach is most appropriate?
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