In a paired sales analysis, two similar properties sold within a short time period. Property A has a two-car garage and sold for $485,000. Property B has a one-car garage and sold for $470,000. What is the indicated adjustment for the garage difference?
Correct Answer
A) $15,000 for an additional garage space
Paired sales analysis isolates the value of specific features by comparing similar properties that differ in only one characteristic. The $15,000 difference ($485,000 - $470,000) represents the market's valuation of the additional garage space.
Why This Is the Correct Answer
The correct answer is A because paired sales analysis directly measures market reaction to specific differences between properties. Since Property A (two-car garage) sold for $485,000 and Property B (one-car garage) sold for $470,000, the $15,000 difference ($485,000 - $470,000 = $15,000) represents exactly what the market is willing to pay for an additional garage space. This is the fundamental principle of paired sales analysis - the price difference equals the feature value when all other factors are held constant. The calculation is straightforward and reflects actual market behavior rather than theoretical estimates.
Why the Other Options Are Wrong
Option B: $7,500 for an additional garage space
$7,500 would be half of the actual price difference, which has no basis in the paired sales analysis methodology. This might represent a misunderstanding where someone incorrectly divided the price difference by two, perhaps thinking they needed to average or split the difference somehow.
Option C: $30,000 for an additional garage space
$30,000 would be double the actual price difference, which contradicts the basic math of paired sales analysis. This error might occur if someone mistakenly doubled the calculation or confused this with a different type of adjustment calculation.
Option D: Cannot be determined from the information given
The information provided is actually sufficient to determine the garage adjustment value. We have two comparable properties that differ only in garage capacity, sold within a short time period, making this a textbook example of when paired sales analysis can be reliably applied.
PAIR = Price Difference
PAIR: Price difference = Adjustment for Isolated feature in Real estate. Remember 'What you see is what you get' - the price difference IS the adjustment value when using paired sales analysis.
How to use: When you see a paired sales question, immediately subtract the lower price from the higher price. That difference equals the value of the superior feature - no complex calculations needed.
Exam Tip
In paired sales questions, always do the simple subtraction first: higher sale price minus lower sale price equals the adjustment value. Don't overthink it or look for complex formulas.
Common Mistakes to Avoid
- -Dividing the price difference by two thinking you need to 'split' the adjustment
- -Multiplying the difference by some factor instead of using the direct difference
- -Assuming insufficient information exists when the paired sales criteria are clearly met
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental appraisal technique that isolates the market value of specific property features by comparing two similar properties that differ in only one characteristic. This method requires that the properties be truly comparable in all other aspects (location, size, condition, age, etc.) and that the sales occurred within a reasonable time frame to ensure market conditions were similar. The difference in sale prices directly reflects the market's valuation of the differing feature, making this a reliable method for determining adjustments in the sales comparison approach. The key assumption is that all other variables are held constant, allowing the appraiser to attribute the price difference solely to the feature being analyzed.
Background Knowledge
Paired sales analysis requires properties that are truly comparable except for one feature, with sales occurring in similar market conditions and timeframes. The method assumes that the price difference between the two properties can be attributed entirely to the differing feature, making it one of the most reliable techniques for determining feature adjustments in appraisal practice.
Real-World Application
Appraisers use paired sales analysis regularly to develop adjustment grids for the sales comparison approach. For example, when appraising a home with a two-car garage, an appraiser might use this $15,000 adjustment to modify the sale price of a comparable property that only had a one-car garage, making the comparison more accurate.
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