In paired sales analysis, an appraiser finds two similar properties where one has a pool and sold for $385,000, while the other without a pool sold for $365,000. Both sales occurred on the same date. The indicated adjustment for a pool is:
Correct Answer
A) $20,000
Paired sales analysis isolates the value of a single feature by comparing two similar properties that differ primarily in that feature. The $20,000 difference ($385,000 - $365,000) represents the market's reaction to the pool.
Why This Is the Correct Answer
The correct answer demonstrates the core principle of paired sales analysis - subtracting the sale price of the property without the feature from the sale price of the property with the feature. Since both properties are similar except for the pool, the $20,000 difference ($385,000 - $365,000) represents the market-derived adjustment for having a pool. This calculation isolates the pool's contributory value by controlling for all other variables. The simultaneous sale dates ensure that market conditions were identical, making this a clean comparison.
Why the Other Options Are Wrong
Option B: $365,000
Option B represents the total sale price of the property without the pool, not the adjustment amount. The adjustment is the difference between the two sale prices, not the absolute value of either property. Using $365,000 as the adjustment would grossly overstate the pool's contributory value and violate basic paired sales methodology.
Option C: $385,000
Option C represents the total sale price of the property with the pool, not the pool's contributory value. Like option B, this confuses the total property value with the isolated feature adjustment. The adjustment must be calculated as the difference between comparable sales, not taken as an absolute sale price.
Option D: Cannot be determined from this information
Option D is incorrect because paired sales analysis can be performed when sufficient information exists. The question provides two truly comparable properties differing only by the pool feature, with identical sale dates ensuring consistent market conditions. This scenario provides all necessary data points for a valid paired sales analysis calculation.
PAIR Subtraction Method
PAIR = Property A minus Property B = Isolated Adjustment Result. Always subtract the lower-featured property price from the higher-featured property price to get the positive adjustment amount.
How to use: When you see paired sales questions, immediately identify which property has more features, then subtract the lesser property's price from the greater property's price. The result is always your adjustment amount for the differing feature.
Exam Tip
Look for the key phrase 'similar properties' and identify the single differing feature. Always subtract the lower sale price from the higher sale price to get a positive adjustment amount.
Common Mistakes to Avoid
- -Using the total sale price instead of calculating the difference between properties
- -Failing to verify that properties are truly comparable except for the single differing feature
- -Applying paired sales analysis when market conditions or time periods differ between sales
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental adjustment technique in the sales comparison approach where appraisers isolate the contributory value of specific property features. This method requires finding two properties that are nearly identical except for one key difference, allowing the appraiser to determine how much that single feature contributes to market value. The technique assumes that the difference in sale prices directly reflects the market's valuation of the differing feature. For this analysis to be valid, the properties must be truly comparable in all other aspects including location, size, condition, and market conditions at time of sale.
Background Knowledge
Paired sales analysis requires finding properties that are identical or nearly identical except for one feature, then calculating the difference in their sale prices to determine that feature's market value contribution. The analysis assumes that all other factors affecting value are held constant, making the price difference attributable solely to 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 appraising a subject property, ensuring adjustments reflect actual market behavior rather than cost or appraiser opinion.
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