Which adjustment addresses a vacant comparable’s sale-date difference from the appraisal’s effective date, when supported market price levels changed?
Correct Answer
B) Adjustment for market conditions since the sale
A market-conditions adjustment addresses supported price movement between the comparable’s sale date and the effective date. Size, zoning and corner location concern property characteristics. Adjustments must reflect market evidence; this question does not establish a universal order for every appraisal.
Why This Is the Correct Answer
Option B is correct because a market conditions adjustment accounts for the difference in market conditions between the date of sale and the valuation date. When supported evidence shows price levels changed, the comparable must be adjusted so it reflects the same conditions as the effective date. This addresses timing rather than physical or legal characteristics.
Why the Other Options Are Wrong
Option A: Adjustment for the physical size of the parcel
Option A, an adjustment for the physical size of the parcel, is wrong because size is a property characteristic. It does not account for price changes between the sale date and the effective date.
Option C: Adjustment for the parcel's zoning classification
Option C, an adjustment for the parcel's zoning classification, is wrong because zoning is a legal characteristic of the property. It does not address changes in market price levels over time.
Option D: Adjustment for corner influence and street frontage
Option D, an adjustment for corner influence and street frontage, is wrong because these are location and physical characteristics. They do not reflect the passage of time between sale and valuation.
Time gap, market conditions
A gap in time between sale and valuation calls for a market conditions adjustment; property features call for other adjustments.
How to use: Use this to match a sale-date difference with the correct element of comparison.
Exam Tip
When a question highlights the sale date versus the effective date, look for the market conditions adjustment.
Common Mistakes to Avoid
- -Confusing a market conditions adjustment with a location adjustment
- -Adjusting for time without market evidence of price change
Concept Deep Dive
Analysis
This question tests identifying the adjustment for differences in sale date. When market price levels changed between a comparable's sale and the effective date, a market conditions adjustment brings the price to current levels. Other adjustments address property characteristics, not timing.
Background Knowledge
Elements of comparison in sales comparison include property rights, financing, conditions of sale, market conditions, location and physical characteristics. The market conditions adjustment, sometimes called a time adjustment, reflects price changes between the sale date and the effective date. It must be supported by market evidence.
Real-World Application
A comparable vacant lot sold eighteen months before the effective date, and paired resales show land prices in the area rose since then. The appraiser applies a supported market conditions adjustment to bring the comparable to current price levels.
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A tract will yield 40 lots selling at $80,000 each. Development costs are $1,200,000, sales and marketing run 8 percent of gross, and the developer requires a 20 percent profit on gross. These deductions include all nonland costs and incentive. Ignoring timing and discounting, what land value is indicated?