In paired sales analysis, two similar properties sold for $280,000 and $295,000. The only significant difference was that the higher-priced property had a fireplace. The indicated adjustment for a fireplace is:
Correct Answer
A) $15,000
Paired sales analysis isolates the value of specific features by comparing sales that differ by only one characteristic. The difference of $295,000 - $280,000 = $15,000 represents the market's reaction to the fireplace feature.
Why This Is the Correct Answer
Option A is correct because paired sales analysis directly measures the market's valuation of the fireplace feature through the price difference. Since the properties are described as similar with the fireplace being the only significant difference, the $15,000 price differential ($295,000 - $280,000) represents the market-derived adjustment for the fireplace. This is the fundamental principle of paired sales analysis - the difference in sale prices equals the value of the differing feature. No additional calculations or adjustments are needed when the comparison is this clean.
Why the Other Options Are Wrong
Option B: $7,500
$7,500 would represent only half of the actual price difference, which has no basis in paired sales analysis methodology. This might result from incorrectly thinking the adjustment should be split or averaged, but the full price difference represents the market's valuation of the feature.
Option C: 5.4%
While 5.4% represents the percentage difference between the sale prices ($15,000 ÷ $280,000), paired sales analysis typically expresses adjustments in dollar amounts rather than percentages. The dollar amount provides a more direct and usable adjustment figure for appraisal purposes.
Option D: Cannot be determined without more information
This option is incorrect because the problem provides sufficient information for paired sales analysis - two similar properties with one significant difference and their respective sale prices. No additional data is needed to calculate the indicated adjustment when the comparison is this straightforward.
PAIR = Price Difference
PAIR: Price difference = Adjustment In Real terms. When you see paired sales, think 'subtract the prices to get the adjustment' - it's that simple when properties truly differ by only one feature.
How to use: When you encounter a paired sales question, immediately identify the two sale prices and subtract the lower from the higher. If the question states the properties differ by only one feature, that difference IS your adjustment amount.
Exam Tip
Look for key phrases like 'only significant difference' or 'similar properties except for' - these signal a straightforward paired sales calculation where you simply subtract the sale prices.
Common Mistakes to Avoid
- -Dividing the price difference by two thinking the adjustment should be 'shared'
- -Converting to a percentage when a dollar amount is requested
- -Overthinking the calculation when the problem states properties differ by only one feature
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental technique in real estate appraisal that isolates the market value contribution of specific property features by comparing two similar properties that differ by only one characteristic. This method relies on the principle that the difference in sale prices between two otherwise identical properties can be attributed to the single differing feature. The technique requires careful selection of comparable sales to ensure that all other factors (location, size, condition, etc.) are essentially equal. When properly applied, paired sales analysis provides direct market evidence of how buyers value specific amenities or features.
Background Knowledge
Paired sales analysis is one of the most reliable methods for determining property feature adjustments in the sales comparison approach. The technique requires finding sales of properties that are nearly identical except for one feature, allowing appraisers to isolate and quantify the market value of specific amenities or characteristics.
Real-World Application
Appraisers regularly use paired sales analysis to develop adjustment grids for features like pools, garages, fireplaces, or additional bedrooms. This market-derived data is more reliable than cost-based adjustments and is preferred by underwriters and review appraisers.
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