In a paired sales analysis, two similar properties sold for $350,000 and $365,000. The only significant difference was that the higher-priced property had a fireplace. What adjustment should be made for a fireplace?
Correct Answer
D) Both a and b are correct
In paired sales analysis, the difference ($15,000) represents the market's reaction to the fireplace. This can be expressed as either a positive adjustment for having a fireplace or a negative adjustment for lacking one.
Why This Is the Correct Answer
Option D is correct because both options A and B represent mathematically equivalent and valid ways to express the same market-derived adjustment. The $15,000 difference can be applied as either a +$15,000 adjustment for properties with fireplaces or a -$15,000 adjustment for properties without fireplaces. In paired sales analysis, the direction of the adjustment depends on whether you're adjusting upward for a superior feature or downward for an inferior feature, but the absolute value remains the same. Both approaches will yield identical final adjusted values when properly applied.
Why the Other Options Are Wrong
Option C: $7,500 adjustment (half the difference)
Option C is incorrect because there is no basis for using half the difference ($7,500) in paired sales analysis. The full $15,000 difference represents the market's complete reaction to the fireplace feature, and arbitrarily reducing this by half would not reflect actual market behavior. Paired sales analysis uses the entire difference between comparable sales, not a fraction of it.
The Two-Way Street Rule
Think of adjustments like a two-way street: you can either ADD value going uphill (+$15K for having the feature) or SUBTRACT value going downhill (-$15K for lacking the feature). Both streets lead to the same destination - the correct adjusted value.
How to use: When you see paired sales analysis questions, remember that the difference can be expressed in two equivalent ways. Ask yourself: 'Am I adjusting UP for having something good, or DOWN for missing something good?' Both are correct as long as the dollar amount matches the market difference.
Exam Tip
Look for 'both A and B are correct' type answers in paired sales questions - often the same adjustment can be validly expressed as either positive or negative depending on the direction of comparison.
Common Mistakes to Avoid
- -Using half the difference instead of the full market-indicated amount
- -Thinking only one direction of adjustment is correct
- -Failing to recognize that positive and negative adjustments are mathematically equivalent
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental valuation technique that isolates the market value of specific property features by comparing two nearly identical properties that differ in only one significant characteristic. The $15,000 difference between the two properties represents the market's quantified reaction to the presence or absence of a fireplace. This difference can be mathematically expressed in two equivalent ways: as a positive adjustment when adding value for properties that have the feature, or as a negative adjustment when subtracting value for properties that lack the feature. Both expressions represent the same market-derived data and are equally valid in appraisal practice.
Background Knowledge
Paired sales analysis requires finding two properties that are nearly identical except for one significant difference, then using the sale price difference to quantify the market value of that specific feature. The adjustment amount can be expressed as either positive (adding value for superior features) or negative (subtracting value for inferior features), depending on the direction of comparison.
Real-World Application
In practice, appraisers choose the adjustment direction based on their workflow and the subject property's characteristics. If the subject has a fireplace, they might use comparable sales without fireplaces and adjust upward. If the subject lacks a fireplace, they might use comparable sales with fireplaces and adjust downward.
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