In a paired sales analysis, two similar properties sold within the same time period. Property A (with a pool) sold for $385,000, and Property B (without a pool) sold for $365,000. What is the indicated adjustment for a swimming pool?
Correct Answer
A) +$20,000
In paired sales analysis, the difference in sale prices indicates the value of the differing feature. $385,000 - $365,000 = +$20,000 for the swimming pool.
Why This Is the Correct Answer
Option A is correct because paired sales analysis directly measures the market's valuation of specific features through actual sale price differences. When Property A (with pool) sold for $385,000 and Property B (without pool) sold for $365,000, the $20,000 difference represents the market-derived value contribution of the swimming pool. This positive adjustment of +$20,000 would be applied when adjusting comparable sales that lack a pool when appraising a subject property that has one. The calculation is straightforward: higher sale price minus lower sale price equals the value of the differentiating feature.
Why the Other Options Are Wrong
Option B: -$20,000
Option B is incorrect because it shows a negative adjustment of -$20,000, which would imply that having a swimming pool decreases property value. This contradicts the sales data showing that Property A with the pool sold for more money than Property B without the pool. A negative adjustment would only be appropriate if the pool actually detracted from value, which is not supported by these sales figures.
Option C: +$365,000
Option C is incorrect because +$365,000 represents the entire sale price of Property B, not the value contribution of the swimming pool. This fundamental error confuses the total property value with the incremental value of a single feature. Using the full sale price as an adjustment would grossly overstate the pool's contribution and result in severely inflated property valuations.
Option D: +5.5%
Option D is incorrect because while 5.5% may mathematically represent the percentage difference between the sale prices, paired sales analysis adjustments are expressed as dollar amounts, not percentages. Additionally, percentage adjustments can be misleading when applied across different price ranges, whereas dollar adjustments provide consistent value indications regardless of the overall property value level.
PAIR = Price A minus Price B = Real adjustment
Remember 'PAIR' - take the Price of property A (higher) minus Price of property B (lower) equals the Real dollar adjustment for the feature. Always subtract the lower price from the higher price to get a positive adjustment for the feature that the higher-priced property has.
How to use: When you see a paired sales question, immediately identify which property sold for more, subtract the lower sale price from the higher one, and that difference is the positive adjustment for whatever feature the higher-priced property has that the other lacks.
Exam Tip
Always double-check that your adjustment sign (+ or -) makes logical sense - if a property with a desirable feature like a pool sells for more, the adjustment should be positive when that feature is present.
Common Mistakes to Avoid
- -Confusing which property gets the positive vs negative adjustment
- -Using percentage adjustments instead of dollar amounts
- -Applying the full sale price instead of just the difference
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental appraisal technique used to isolate the value contribution of specific property features by comparing two similar properties that differ primarily in one characteristic. The method assumes that all other factors affecting value are essentially equal between the two properties, allowing the appraiser to attribute the price difference to the single varying feature. This technique is most reliable when the properties are truly comparable in location, size, condition, and timing of sale, with only one significant difference. The resulting adjustment can then be applied to other comparable sales to account for the presence or absence of that specific feature.
Background Knowledge
Paired sales analysis requires finding truly comparable properties that differ in only one significant feature, sold within a reasonable time frame to minimize market condition impacts. The technique assumes that buyers and sellers are making rational decisions and that the market price difference accurately reflects the value contribution of the varying feature.
Real-World Application
Appraisers regularly use paired sales analysis to develop adjustment grids for features like pools, garages, fireplaces, or additional bedrooms. These market-derived adjustments are then applied to comparable sales when preparing appraisal reports, providing objective support for value adjustments rather than relying solely on appraiser judgment.
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