Two otherwise identical cash-equivalent sales, with all other influences controlled, sold for $365,000 with a fireplace and $350,000 without one. What directions follow from this pair?
Correct Answer
C) Add $15,000 to a comparable lacking the fireplace; subtract it for the reverse
365,000 − 350,000 = 15,000. Add $15,000 to a comparable that lacks the fireplace the subject has, and subtract $15,000 when the comparable has a fireplace the subject lacks. Common errors: reversing the adjustment directions gives the first choice; halving the paired difference and ignoring direction gives $7,500 for every comparable; doubling the difference and ignoring direction gives $30,000 for every comparable.
Why This Is the Correct Answer
Option C is correct because the pair shows a fireplace contribution of $365,000 − $350,000 = $15,000. Add $15,000 to a comparable that lacks the fireplace the subject has, and subtract $15,000 from a comparable that has a fireplace the subject lacks. This adjusts each comparable toward the subject.
Why the Other Options Are Wrong
Option A: Subtract $15,000 for an inferior comparable and add $15,000 for the reverse
Option A, subtract $15,000 for an inferior comparable and add $15,000 for the reverse, uses the right amount but reverses the directions. An inferior comparable must be adjusted upward by the $365,000 − $350,000 = $15,000 contribution, not downward.
Option B: Add $7,500 to each comparable, whether or not it has a fireplace
Option B, add $7,500 to each comparable whether or not it has a fireplace, halves the paired difference ($15,000 ÷ 2 = $7,500) and ignores direction. The correct contribution is $365,000 − $350,000 = $15,000, applied up or down depending on the comparison.
Option D: Subtract $30,000 from each comparable that has a fireplace
Option D, subtract $30,000 from each comparable that has a fireplace, doubles the paired difference ($15,000 × 2 = $30,000). The supported contribution is $365,000 − $350,000 = $15,000.
CBS: Comp Better, Subtract
If the comparable is better than the subject, subtract; if the comparable is poorer, add.
How to use: Use this to set the sign of any adjustment once the dollar amount is known.
Exam Tip
First compute the paired difference, then decide the sign by asking whether the comparable is better or worse than the subject on that feature.
Common Mistakes to Avoid
- -Reversing the direction of the adjustment
- -Halving or doubling the paired difference
- -Applying the adjustment to the subject instead of the comparable
Concept Deep Dive
Analysis
This question tests paired sales analysis and the direction of adjustments. The paired difference isolates the fireplace's contribution, and adjustments are made to the comparable to make it like the subject. A comparable lacking a feature the subject has is adjusted up; a comparable with a feature the subject lacks is adjusted down.
Background Knowledge
Paired sales analysis compares nearly identical properties to isolate the effect of a single characteristic on value. Adjustments are made to the comparable, not the subject, and must reflect the market's reaction to the difference.
Real-World Application
An appraiser finds two nearly identical ranch homes on the same street that sold a week apart, one with a fireplace for $365,000 and one without for $350,000. The appraiser uses the $15,000 difference to adjust comparables that differ from the subject on that feature.
More Sales Comparison Questions
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