Expenditures made immediately after purchase are an element of comparison because:
Correct Answer
C) The buyer effectively paid price plus those costs
Why this is correct: The governing concept is that the total investment a buyer makes includes the purchase price plus any immediate, necessary expenditures. This total cost is the true basis for comparison. The original explanation illustrates this: a $300,000 purchase with a known $40,000 roof cost means the buyer effectively paid $340,000. To make a comparable sale truly comparable, its price must be adjusted to reflect this same total investment level. Why the other choices are wrong: The choice "Sellers typically reimburse them at closing" is wrong because reimbursement is a negotiated term, not a standard practice, and does not change the fundamental economic principle of total buyer investment. The choice "They increase the property's assessed value" is wrong because assessed value for tax purposes is determined by the assessor and is not directly or immediately changed by post-purchase expenditures. The choice "They ultimately determine the property's remaining economic life" is wrong because while repairs may extend a property's life, this is a separate concept from price adjustment in the sales comparison approach, which focuses on the effective price paid at the time of sale. Exam tip: In the sales grid, think like the buyer: the total cash outlay (price + immediate known costs) is the true basis for comparison.
Why This Is the Correct Answer
Why this is correct: The governing concept is that the total investment a buyer makes includes the purchase price plus any immediate, necessary expenditures. This total cost is the true basis for comparison. The original explanation illustrates this: a $300,000 purchase with a known $40,000 roof cost means the buyer effectively paid $340,000. To make a comparable sale truly comparable, its price must be adjusted to reflect this same total investment level. Why the other choices are wrong: The choice "Sellers typically reimburse them at closing" is wrong because reimbursement is a negotiated term, not a standard practice, and does not change the fundamental economic principle of total buyer investment. The choice "They increase the property's assessed value" is wrong because assessed value for tax purposes is determined by the assessor and is not directly or immediately changed by post-purchase expenditures. The choice "They ultimately determine the property's remaining economic life" is wrong because while repairs may extend a property's life, this is a separate concept from price adjustment in the sales comparison approach, which focuses on the effective price paid at the time of sale. Exam tip: In the sales grid, think like the buyer: the total cash outlay (price + immediate known costs) is the true basis for comparison.
More sales-comparison-approach Questions
Excess land differs from surplus land in that excess land:
A subject property has a 3-car attached garage. The appraiser locates two valid paired sales: Sale 1 (with 3-car garage) sold for $512,000; Sale 2 (with 2-car garage) sold for $497,600. Both properties are otherwise identical — same age, quality, GLA, lot size, and neighborhood — and sold 5 days apart in a balanced market. The appraiser also confirms via public records and listing photos that no other functional or physical differences exist. What is the indicated contributory value of the *third* garage stall?
The most appropriate unit of comparison is determined by:
An appraiser analyzes three paired sales to isolate the effect of a fireplace. In Pair 1, the property with a fireplace sold for $12,000 more; in Pair 2, $10,500 more; and in Pair 3, $13,500 more. All pairs are highly similar and recent. The appraiser selects $12,000 as the final adjustment. Which principle best supports this selection?
A paired sales analysis yields an adjustment of −$15,000 for a property located on a busy arterial street. Later, the appraiser discovers that all three paired properties with arterial exposure also had 20% smaller lots than their non-arterial counterparts — a difference not initially controlled for. What is the most appropriate action per USPAP?
An appraiser identifies two comparable sales that are identical in all respects except that Sale #1 has a finished basement (1,200 sq ft) and sold for $432,000, while Sale #2 has an unfinished basement of the same size and sold for $408,000. Both sales occurred within three weeks of each other in a stable market. The appraiser intends to apply a per-square-foot adjustment for basement finish to the subject property, which has a 1,000 sq ft finished basement. What is the appropriate paired-sales-derived adjustment amount per square foot for a finished basement?
Three sales support $520,000; the borrower's purchase contract is $505,000. May the appraisal conclude above the contract price?
An appraiser develops a $3,200 adjustment for a fireplace based on a single paired sale. The subject has a fireplace; Comparable A does not. The appraiser applies +$3,200 to Comparable A. Later, the appraiser identifies a second pair showing a $4,600 fireplace contribution. The appraiser replaces the original adjustment with $3,900 — the simple average — and applies it to Comparable A. What is the appropriate USPAP-compliant action regarding the adjustment amount?
A comparable sold for $300,000 with the seller carrying a loan 2 points below market, a benefit worth $8,000. What is its cash-equivalent price?
Three comparables adjust to $412,000 (gross adj. 5%), $405,000 (gross adj. 22%), and $410,000 (gross adj. 8%). What is the best-supported value conclusion?
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