In paired sales analysis, two similar properties sold within the same time period. Property A has a two-car garage and sold for $285,000. Property B has a one-car garage and sold for $275,000. All other features are essentially the same. What is the indicated adjustment for the garage difference?
Correct Answer
B) $10,000 for each additional garage space
Why this is correct: Paired sales analysis isolates the value contribution of a single feature by comparing two otherwise similar sales. Here, Property A ($285,000) has one more garage space than Property B ($275,000). The price difference of $10,000 ($285,000 - $275,000) is attributed solely to that one additional garage space, indicating a $10,000 adjustment per space. Why the other choices are wrong: "$20,000 for each additional garage space" incorrectly doubles the observed difference. "$5,000 for each additional garage space" halves it. "$15,000 for each additional garage space" adds an arbitrary $5,000 to the actual difference. Exam tip: In paired sales, subtract the lower sale price from the higher to find the adjustment for the feature present in the higher-priced sale.
Why This Is the Correct Answer
Option B correctly applies the paired sales analysis methodology by taking the direct difference between the two sale prices ($285,000 - $275,000 = $10,000) and attributing it to the single differing feature. Since Property A has one additional garage space compared to Property B, the entire $10,000 price difference represents the market's valuation of that extra garage space. This straightforward calculation demonstrates that each additional garage space contributes $10,000 to the property's value. The analysis is valid because all other features are essentially the same, creating a perfect controlled comparison.
Why the Other Options Are Wrong
Option A: $20,000 for each additional garage space
Option A incorrectly calculates the adjustment as $5,000 per garage space, which would only account for half of the observed price difference between the properties, leaving $5,000 unexplained.
Option C: $5,000 for each additional garage space
Option C overstates the adjustment at $15,000 per garage space, which would suggest the garage difference should create a $15,000 price gap, but the actual observed difference is only $10,000.
Option D: $15,000 for each additional garage space
Option D significantly overstates the adjustment at $20,000 per garage space, which would imply a price difference twice as large as what was actually observed in the market data.
Simple Subtraction Rule
Remember 'SUBTRACT and ATTRIBUTE': Subtract the lower price from the higher price, then attribute the entire difference to the single varying feature.
How to use: When you see a paired sales question, immediately identify the price difference and the feature difference, then divide the price difference by the feature difference to get the per-unit adjustment.
Exam Tip
Always double-check your math by working backwards - multiply your calculated adjustment by the feature difference to see if it equals the price difference.
Common Mistakes to Avoid
- -Dividing the price difference by 2 instead of attributing the full amount to the feature difference
- -Using properties that differ in multiple features, making it impossible to isolate the value of one feature
- -Applying adjustments from different time periods without considering market changes
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental appraisal technique that isolates the value contribution of a single feature by comparing two highly similar properties 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 varying feature. The technique requires properties to be sold within a similar time frame to eliminate market condition variables and ensures that location, size, condition, and other major features are essentially identical. This creates a controlled comparison that allows appraisers to extract reliable adjustment values for specific property features.
Background Knowledge
Paired sales analysis requires finding properties that are nearly identical except for one feature, sold within a similar time period under similar market conditions. The difference in sale prices is directly attributed to the varying feature, providing a market-derived adjustment amount that can be applied to other appraisals.
Real-World Application
Appraisers use paired sales analysis daily to develop adjustment grids for features like garage spaces, bathrooms, square footage, or lot size by analyzing recent comparable sales that differ in specific features.
More Sales Comparison Questions
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