In paired sales analysis, Comparable Sale A sold for $285,000 with a two-car garage, while Comparable Sale B sold for $265,000 without a garage. Both properties are otherwise similar. What is the indicated adjustment for a garage?
Correct Answer
B) $20,000
Why this is correct: Paired sales analysis isolates the value contribution of a single differing feature. The price difference ($285,000 - $265,000 = $20,000) between the otherwise similar sales is attributed to the presence of the two-car garage. Why the other choices are wrong: $275,000 is not derived from the calculation. $10,000 would be half the difference, not the full adjustment. 7.5% is a percentage, not the dollar amount asked for. Exam tip: In paired sales, subtract the sale prices to find the dollar adjustment for the differing feature.
Why This Is the Correct Answer
Option B ($20,000) is correct because paired sales analysis requires a simple subtraction calculation to determine the adjustment amount. Since Comparable Sale A (with garage) sold for $285,000 and Comparable Sale B (without garage) sold for $265,000, the mathematical difference of $20,000 represents the market's valuation of the garage feature. This dollar amount becomes the adjustment that should be applied when comparing properties with and without garages in future appraisals. The calculation is straightforward: $285,000 - $265,000 = $20,000.
Why the Other Options Are Wrong
Option A: $275,000
Option A ($275,000) is incorrect because it appears to be an average of the two sale prices rather than the difference between them, which is not how paired sales analysis works.
Option C: $10,000
Option C ($10,000) is incorrect because it represents only half of the actual difference between the two sale prices, suggesting a calculation error or misunderstanding of the paired sales methodology.
Option D: 7.5%
Option D (7.5%) is incorrect because paired sales analysis typically expresses adjustments in dollar amounts rather than percentages, and this percentage doesn't accurately represent the relationship between the garage value and either sale price.
PAIR = Subtract
PAIR: Price A minus Price B = Isolated Adjustment Result. Remember that in paired sales, you always subtract the lower price from the higher price to get the positive adjustment amount.
How to use: When you see a paired sales question, immediately identify which property has the superior feature, then subtract the inferior property's price from the superior property's price to get your adjustment.
Exam Tip
Always double-check your subtraction and make sure you're subtracting in the right direction (higher price minus lower price) to get a positive adjustment amount.
Common Mistakes to Avoid
- -Subtracting in the wrong direction (lower price minus higher price)
- -Averaging the two prices instead of finding the difference
- -Converting the dollar difference to a percentage when a dollar amount is requested
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental technique in real estate appraisal that isolates the value contribution of specific property features by comparing two similar sales that differ in only one characteristic. This method relies on the principle that when all other factors are held constant, the difference in sale prices can be directly attributed to the differing feature. The technique is most reliable when the comparable sales are truly similar in all respects except for the feature being analyzed, and when the sales occurred within a reasonable time frame of each other. Paired sales analysis forms the foundation for developing adjustment grids in the sales comparison approach to value.
Background Knowledge
Paired sales analysis is one of the most reliable methods for extracting adjustment amounts in the sales comparison approach, as it uses actual market data rather than cost estimates or subjective judgments. The technique requires finding two sales that are identical except for one feature, allowing appraisers to isolate the market's perception of that feature's value contribution.
Real-World Application
Appraisers use paired sales analysis regularly when developing adjustment grids for features like pools, fireplaces, finished basements, or lot size differences, as it provides market-supported evidence rather than relying on cost estimates or rules of thumb.
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In a paired sales analysis, Property A sold for $320,000 with a garage, and Property B sold for $295,000 without a garage. All other features are similar. What is the indicated adjustment for a garage?
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Using paired sales analysis, Sale A sold for $280,000 with a two-car garage, and Sale B sold for $265,000 without a garage. All other features are similar. What is the indicated adjustment for a garage?