Two cash-equivalent sales are otherwise identical after controlling for rights, terms, date and relevant characteristics. The with-feature price is $400,000 and without-feature price $380,000. What positive contribution magnitude does this pair indicate for the feature? No direction toward a particular subject is requested.
Correct Answer
B) $20,000
400000−380000=20000. Common errors: reporting the with-feature price gives $400,000; averaging the two prices gives $390,000; halving the paired difference gives $10,000.
Why This Is the Correct Answer
Option B is correct because the controlled pair differs only in the feature, so its contribution is $400,000 − $380,000 = $20,000. Paired sales are a recognized method for determining adjustment rates. The magnitude is positive because the with-feature sale sold for more.
Why the Other Options Are Wrong
Option A: $10,000
Option A, $10,000, halves the paired difference: ($400,000 − $380,000) ÷ 2 = $10,000. The full difference of $20,000 is the feature's indicated contribution.
Option C: $390,000
Option C, $390,000, averages the two prices: ($400,000 + $380,000) ÷ 2 = $390,000. That is a midpoint price, not the feature's contribution of $20,000.
Option D: $400,000
Option D, $400,000, is simply the with-feature sale price. The contribution is the difference between the two prices, $20,000.
With minus without
Feature value from a clean pair equals the with-feature price minus the without-feature price.
How to use: Use this for any controlled paired sales calculation.
Exam Tip
Read whether the question asks for a magnitude or a signed adjustment toward a subject.
Common Mistakes to Avoid
- -Splitting the paired difference in half
- -Averaging the two prices
- -Using a pair without controlling for other differences
Concept Deep Dive
Analysis
This question tests the basic paired sales calculation. When two sales are otherwise identical after controlling for other factors, the price difference indicates the contribution of the one differing feature. The stem asks only for the magnitude, not the direction of an adjustment to a subject.
Background Knowledge
Paired sales analysis compares nearly identical sales that differ in a single characteristic. After controlling for other differences, the price difference is attributed to that characteristic. In practice, several pairs are often examined to support a reliable adjustment.
Real-World Application
Two otherwise similar homes on the same street sold a week apart, one with a finished basement and one without. The appraiser uses the price difference, together with other pairs, to support a basement finish adjustment.
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