In paired sales analysis, comparable sale A sold for $350,000 with a 2-car garage, while comparable sale B sold for $335,000 with a 1-car garage. Both properties are otherwise identical. What is the adjustment for the garage difference?
Correct Answer
B) $15,000 per garage space
Why this is correct: Paired sales analysis isolates the value of a single differing feature. The price difference ($350,000 - $335,000 = $15,000) is due to one additional garage space (2-car vs. 1-car), indicating a $15,000 adjustment per garage space. Why the other choices are wrong: $350,000 per garage space is the sale price, not the adjustment. $7,500 per garage space would incorrectly halve the difference. $335,000 per garage space is the lower sale price, not the adjustment. Exam tip: In paired sales, the price difference equals the value of the feature difference.
Why This Is the Correct Answer
Option A correctly applies the paired sales analysis methodology by calculating the direct difference between the two sale prices ($350,000 - $335,000 = $15,000) and attributing this entire difference to the one additional garage space. Since the properties are otherwise identical, this $15,000 difference represents the market's valuation of one garage space. This straightforward calculation isolates the value contribution of the garage difference and provides the per-unit adjustment amount needed for future appraisals.
Why the Other Options Are Wrong
PAIR-DIFF Method
PAIR = Properties Are Identical Regardless, DIFF = Direct Difference Formula. Remember: Find the PAIR (identical properties except one feature), calculate the DIFF (price difference), and that difference equals the adjustment per unit of the varying feature.
How to use: When you see paired sales questions, immediately identify the PAIR (what's identical vs. what's different), then calculate the DIFF (subtract lower price from higher price) to find the per-unit adjustment for the differing feature.
Exam Tip
Always subtract the lower sale price from the higher sale price, then divide by the number of units of difference if there's more than one unit variance between the properties.
Common Mistakes to Avoid
- -Using the entire sale price as the adjustment instead of the price difference
- -Dividing the difference by the wrong number when multiple units are involved
- -Failing to verify that properties are truly identical except for the one varying feature
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 otherwise identical sales that differ in only one characteristic. This method relies on the principle that the difference in sale prices can be directly attributed to the differing feature when all other variables are controlled. The technique requires finding truly comparable properties where only one feature varies, making it possible to extract precise adjustment amounts. This approach is essential for developing reliable adjustment grids used in the sales comparison approach to valuation.
Background Knowledge
Paired sales analysis requires finding two sales that are identical except for one feature, then attributing the entire price difference to that varying feature. The method assumes all other factors affecting value are held constant, making it possible to isolate the market's valuation of specific property characteristics.
Real-World Application
Appraisers use paired sales analysis to build adjustment grids for features like garage spaces, bathrooms, square footage, and lot size by finding sales that differ in only one characteristic, allowing them to quantify how much each feature contributes to property value in specific markets.
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Previous Question
A comparable property is superior to the subject property in location, requiring a $15,000 downward adjustment. The comparable also has an inferior garage, requiring a $5,000 upward adjustment. If the comparable sold for $320,000, what is the adjusted sale price?
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A comparable sale requires a +$15,000 adjustment for location and a -$8,000 adjustment for condition. If the comparable sold for $325,000, what is the adjusted sale price?