In a paired sales analysis, Property A sold for $300,000 with a two-car garage, and Property B sold for $285,000 without a garage. All other features are similar. What is the indicated value of a two-car garage?
Correct Answer
B) $15,000
The difference in sale prices indicates the value of the garage feature. $300,000 - $285,000 = $15,000 for the two-car garage.
Why This Is the Correct Answer
Option B ($15,000) is correct because paired sales analysis uses simple subtraction to isolate feature value. When Property A (with garage) sold for $300,000 and Property B (without garage) sold for $285,000, the $15,000 difference directly represents the market's valuation of the two-car garage. This straightforward calculation assumes all other property characteristics are truly similar, making the price differential attributable solely to the garage feature.
Why the Other Options Are Wrong
Option A: $585,000
Option A ($585,000) represents the sum of both sale prices ($300,000 + $285,000), which has no relevance to determining the value of a single feature in paired sales analysis.
Option C: $292,500
Option C ($292,500) represents the average of the two sale prices (($300,000 + $285,000) ÷ 2), which is used for different analytical purposes but not for isolating feature value in paired sales analysis.
Option D: $7,500
Option D ($7,500) represents half of the actual price difference, possibly resulting from incorrectly dividing the $15,000 difference by two, which has no basis in paired sales methodology.
SUBTRACT for Success
SUBTRACT: Similar properties, Uniform conditions, Basic math (subtraction), Take the difference, Result shows feature value, Attribute difference to the varying feature, Calculate by simple subtraction, Trust the market data
How to use: When you see paired sales questions, immediately think 'SUBTRACT' and look for two similar properties with one key difference, then subtract the lower price from the higher price to find the feature value.
Exam Tip
Always identify which property has the feature and which doesn't, then subtract the price of the property WITHOUT the feature from the price of the property WITH the feature to get the feature's value.
Common Mistakes to Avoid
- -Adding the two sale prices instead of subtracting them
- -Subtracting in the wrong direction (higher price minus lower price)
- -Dividing the difference by two thinking it represents a per-unit value
- -Failing to verify that the properties are truly similar except for the one feature
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental technique in real estate appraisal used to isolate the value contribution of specific property features. This method compares two similar properties that differ primarily in one feature, allowing appraisers to quantify the market's perception of that feature's value. The analysis assumes all other factors are equal (ceteris paribus), making the price difference attributable to the single varying feature. This technique is essential for making adjustments in the sales comparison approach and requires careful selection of truly comparable properties.
Background Knowledge
Paired sales analysis requires understanding that market value differences between similar properties can be attributed to specific features when all other variables are controlled. The technique assumes rational market behavior where buyers pay premiums for desirable features, and these premiums can be quantified through careful comparison of sale prices.
Real-World Application
Appraisers regularly use paired sales analysis to develop adjustment grids for the sales comparison approach, determining how much to adjust comparable sales for differences in features like pools, fireplaces, upgraded kitchens, or additional bathrooms when appraising a subject property.
More Math & Stats Questions
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