In the sales comparison approach, a comparable property sold for $350,000. It has a two-car garage while the subject has a one-car garage. If a garage bay is worth $8,000, what is the adjusted sale price of the comparable?
Correct Answer
B) $342,000
Why this is correct: In the sales comparison approach, always adjust the comparable to the subject. The comparable has a superior feature (an extra garage bay worth $8,000), so its sale price must be adjusted downward to make it equivalent to the subject: $350,000 - $8,000 = $342,000. Why the other choices are wrong: '$366,000' would result from incorrectly adding $8,000 for the subject's inferior feature. '$350,000' implies no adjustment is needed, which is wrong. '$358,000' might come from adding half the adjustment or miscalculating. Exam tip: Remember the rule: Adjust the comparable to the subject. If the comparable is superior, subtract; if inferior, add.
Why This Is the Correct Answer
Option A ($342,000) is correct because it properly applies the adjustment principle by subtracting the value difference from the comparable's sale price. Since the comparable has a superior feature (two-car garage) compared to the subject (one-car garage), we must subtract the $8,000 value of the extra garage bay from the $350,000 sale price. This adjustment makes the comparable 'equal' to the subject property for comparison purposes. The formula is: Comparable Sale Price - Value of Superior Feature = $350,000 - $8,000 = $342,000.
Why the Other Options Are Wrong
Option A: $366,000
Option A ($366,000) not only adds the garage value incorrectly but also doubles the adjustment ($350,000 + $16,000), showing a fundamental misunderstanding of both adjustment direction and calculation.
Option C: $350,000
Option C ($350,000) makes no adjustment at all, ignoring the difference between the two-car and one-car garages. This fails to account for the significant difference in property features that affects value.
Option D: $358,000
Option D ($358,000) incorrectly adds the garage value to the comparable's sale price, which would be the wrong direction of adjustment. This error occurs when appraisers mistakenly think they should adjust the comparable upward when it has a superior feature.
CBS Rule - Comparable Better Subtract
CBS: When the Comparable is Better, Subtract. CWA: When the Comparable is Worse, Add. Think of CBS television network - 'Comparable Better Subtract' - it's always on the air, just like this rule is always in effect.
How to use: When you see an adjustment question, immediately identify whether the comparable is better or worse than the subject for each feature. If better, use CBS (subtract). If worse, use CWA (add). Always adjust the comparable's sale price, never the subject's value.
Exam Tip
Draw a simple chart with 'Comparable' and 'Subject' columns, then mark each feature as +/- to visualize which direction to adjust before calculating.
Common Mistakes to Avoid
- -Adjusting in the wrong direction (adding when should subtract)
- -Making no adjustment when differences exist
- -Adjusting the subject instead of the comparable
Concept Deep Dive
Analysis
This question tests the fundamental principle of adjustments in the sales comparison approach, specifically the direction of adjustments when comparing properties. The sales comparison approach requires adjusting comparable properties to match the subject property's characteristics, not the other way around. When a comparable property has a superior feature (two-car garage vs. one-car garage), the appraiser must subtract the value of that superior feature from the comparable's sale price. This adjustment process ensures that all comparables are normalized to reflect what they would have sold for if they had the same characteristics as the subject property.
Background Knowledge
The sales comparison approach requires adjusting comparable properties to match the subject property's characteristics, with adjustments always made TO the comparable, not from it. When a comparable has a superior feature, subtract its value; when it has an inferior feature, add the value difference.
Real-World Application
In practice, appraisers create detailed adjustment grids comparing multiple sales to the subject property, making numerous adjustments for differences in size, condition, location, amenities, and other features to arrive at an indicated value range for the subject.
More Sales Comparison Questions
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A comparable sale occurred 8 months ago for $425,000. Market conditions indicate property values have increased 0.5% per month since that time. What is the adjusted sale price?
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