In a URAR form, if the subject property has a pool but none of the comparables do, the appraiser should:
Correct Answer
B) Make a positive adjustment to each comparable
When the subject has a feature that comparables lack, positive adjustments are made to the comparables to account for their inferiority. This adjusts the comparable sales to be more similar to the subject property.
Why This Is the Correct Answer
Option B is correct because adjustments in the sales comparison approach are always made to the comparable properties, not the subject. Since the subject has a pool and the comparables don't, the comparables are inferior in this aspect. To make them equivalent to the subject for comparison purposes, we add the contributory value of a pool to each comparable's sale price. This positive adjustment accounts for the fact that if these comparables had pools like the subject, they would have sold for more money.
Why the Other Options Are Wrong
Option A: Make a negative adjustment to the subject
Making a negative adjustment to the subject is incorrect because adjustments are never made to the subject property in the sales comparison approach. The subject is the constant - we adjust the comparables to match the subject, not the other way around. The subject's value is what we're trying to determine, so it cannot be adjusted.
Option C: Find new comparables that have pools
While finding comparables with pools would be ideal, it's not always practical or possible in the market. Appraisers must work with the best available comparables and make appropriate adjustments. The sales comparison approach specifically allows for adjustments to account for differences between properties, making this option unnecessarily restrictive.
Option D: Make no adjustment as pools don't affect value
This is incorrect because pools typically do contribute to property value, especially in certain markets and climates. Assuming pools don't affect value ignores market data and buyer preferences. The appraiser must research the market to determine the contributory value of amenities like pools and make appropriate adjustments.
CATS Rule
Comparables Are The Subject - remember that we adjust comparables TO make them like the subject. If subject is Superior, add to comparables (+). If subject is inferior, subtract from comparables (-).
How to use: When you see adjustment questions, immediately identify: 1) What has the feature (subject or comparable)? 2) Apply CATS - adjust the comparable in the direction that makes it more like the subject. Subject has pool, comparables don't = add to comparables.
Exam Tip
Always remember the adjustment direction: adjustments go TO the comparables, and the direction depends on whether the comparable is superior (+) or inferior (-) to the subject in that feature.
Common Mistakes to Avoid
- -Adjusting the subject instead of the comparables
- -Making negative adjustments to comparables when the subject has superior features
- -Assuming amenities like pools have no contributory value without market research
Concept Deep Dive
Analysis
This question tests the fundamental principle of comparative market analysis adjustments in the sales comparison approach. The key concept is that adjustments are always made TO the comparables, never to the subject property, because the goal is to determine what each comparable would have sold for if it were identical to the subject. When the subject has a superior feature (like a pool) that the comparables lack, we must add value to the comparables to account for their inferiority. This process helps establish what buyers would pay for the subject property based on adjusted comparable sales data.
Background Knowledge
The sales comparison approach requires appraisers to adjust comparable sales to account for differences with the subject property. All adjustments are made TO the comparables, never to the subject, with the goal of determining what each comparable would have sold for if it were identical to the subject property.
Real-World Application
In practice, appraisers research market data to determine contributory values for features like pools, then apply these adjustments consistently. For example, if market analysis shows pools contribute $15,000 to value, this amount would be added to each comparable without a pool when comparing to a subject with a pool.
More Report Writing Questions
Under FIRREA, which federal agency has the authority to set minimum standards for real estate appraisals in federally related transactions?
What is the minimum transaction threshold for requiring a state licensed or certified appraiser under Title XI for most federally related transactions?
The Dodd-Frank Act established which requirement specifically related to appraisal independence?
Which of the following is NOT a responsibility of the Appraisal Subcommittee (ASC)?
State appraiser regulatory agencies are primarily responsible for which of the following functions?
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