In a paired sales analysis, Property A sold for $320,000 with a garage, and Property B sold for $295,000 without a garage. All other features are similar. What is the indicated adjustment for a garage?
Correct Answer
A) $25,000
The difference between the two sales indicates the value of the garage feature. $320,000 - $295,000 = $25,000 adjustment for the garage.
Why This Is the Correct Answer
The correct answer is A ($25,000) because paired sales analysis involves a simple subtraction to isolate the value of the differing feature. Property A with the garage sold for $320,000, while Property B without the garage sold for $295,000. Since all other features are similar, the $25,000 difference ($320,000 - $295,000) represents the market's valuation of the garage feature. This direct comparison method provides the most reliable indication of the garage's contributory value.
Why the Other Options Are Wrong
Option B: $307,500
$307,500 appears to be an average of the two sale prices, which is not the correct methodology for paired sales analysis. Averaging the prices would give you a midpoint value but does not isolate the value contribution of the specific feature being analyzed.
Option C: $615,000
$615,000 represents the sum of both sale prices, which has no relevance to determining the value contribution of the garage feature. Adding the sale prices together does not provide any meaningful adjustment figure for appraisal purposes.
Option D: $12,500
$12,500 is exactly half of the correct answer, suggesting a calculation error where someone might have divided the difference by 2. This could result from confusion about the methodology or misunderstanding that the full difference represents the feature's value.
SUBTRACT for Success
Remember 'SUBTRACT for Success' - in paired sales analysis, you SUBTRACT the lower sale price from the higher sale price to find the feature's value. The acronym SUBTRACT can remind you: Sale price difference = Useful Building feature Tribute (contribution) - Reliable Adjustment Calculation Technique.
How to use: When you see a paired sales question, immediately identify which property has the additional feature, then subtract the price of the property without the feature from the price of the property with the feature. The difference equals the adjustment amount.
Exam Tip
Always double-check which property has the feature and which doesn't before calculating - make sure you're subtracting in the correct direction (higher price minus lower price) to get a positive adjustment value.
Common Mistakes to Avoid
- -Averaging the two sale prices instead of finding the difference
- -Subtracting in the wrong direction (lower price minus higher price)
- -Dividing the difference by 2, thinking you need to split the value somehow
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 properties that are nearly identical except for one distinguishing feature, allowing appraisers to quantify the market's perception of that feature's value. The analysis requires that all other significant factors (location, size, condition, age, etc.) be substantially similar between the properties. The difference in sale prices directly reflects the market value of the differing feature, providing an objective basis for adjustments in the sales comparison approach.
Background Knowledge
Paired sales analysis is one of the most reliable methods for determining adjustment amounts in the sales comparison approach to valuation. The technique requires finding truly comparable sales that differ in only one significant feature, making it possible to isolate and quantify the market value of specific property characteristics.
Real-World Application
Appraisers regularly use paired sales analysis to develop adjustment grids for features like pools, fireplaces, upgraded kitchens, or additional bathrooms. This data helps establish consistent, market-supported adjustments that can be applied to other comparable sales in the same market area.
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