Why must an adjustment analysis identify the intended base and sequence when combining fixed-dollar transaction adjustments with percentage market adjustments?
Correct Answer
C) Changing a percentage’s defined price base can change the resulting adjustment
First identify which price base each market-supported adjustment uses. A common analysis normalizes rights and transaction terms, considers market conditions and then accounts for property differences. Pure fixed-dollar additions commute; percentage multipliers also commute when applied consistently to the same evolving base. A fixed dollar change combined with a percentage can produce different totals if the percentage base changes. The supportable definitions, not size ranking, govern the calculation.
Why This Is the Correct Answer
Option C is correct because a percentage adjustment is calculated on a defined price base, and changing that base changes the resulting dollar adjustment. For example, a market conditions percentage applied after a fixed-dollar transaction adjustment produces a different amount than the same percentage applied to the unadjusted price. Identifying the base and sequence ensures the adjustment matches how the market evidence was measured.
Why the Other Options Are Wrong
Option A: Physical adjustments must precede transaction adjustments in any grid
Option A claims physical adjustments must precede transaction adjustments in any grid. A common sequence actually addresses transaction elements such as property rights and financing first, then market conditions, then property differences, and no rigid physical-first rule exists.
Option B: The largest adjustments are applied first, before any percentage adjustments
Option B says the largest adjustments are applied first, before any percentage adjustments. The size of an adjustment does not determine its order; the order follows the supported definition of each adjustment's price base.
Option D: Fixed and percentage adjustments give the same total in any order
Option D says fixed and percentage adjustments give the same total in any order. That is not true when they are mixed: a percentage applied before a fixed-dollar change uses a different base than one applied after it, so totals can differ.
Percent needs a base
A percentage is only meaningful once you know what it is a percentage of. Change the base, change the dollars.
How to use: Use this reminder whenever a grid mixes dollar adjustments with percentage adjustments.
Exam Tip
Answers claiming a sequence rule based on adjustment size or a fixed physical-first order are usually wrong; look for the answer about the price base.
Common Mistakes to Avoid
- -Assuming every combination of adjustments gives the same total in any order
- -Ordering adjustments by size rather than by their supported price base
- -Applying a market conditions percentage to a price that still includes a financing premium
Concept Deep Dive
Analysis
This question tests why the order and base of mixed adjustments matter. A percentage adjustment depends on the price it is applied to, so if a fixed-dollar adjustment changes that price first, the percentage produces a different dollar amount. Defining the intended base and sequence keeps the analysis consistent with how the market evidence was measured.
Background Knowledge
Transaction adjustments such as property rights, financing terms and conditions of sale are often made first to reach a normalized price, after which a percentage market conditions adjustment is applied to that adjusted price. Fixed-dollar additions alone give the same total in any order, but combining them with percentages makes the base matter. The analysis should state which base each adjustment uses.
Real-World Application
A comparable sold for $500,000 with a $10,000 seller concession that the market reaction analysis supports deducting, and the market has risen 5% since the sale. Applying 5% to the concession-adjusted $490,000 gives $24,500, while applying it to $500,000 gives $25,000. The appraiser states which base the market data support and applies the adjustments in that order.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
A comparable has a cash-equivalent sale price of $680,000. The subject and comparable have the same rights and relevant characteristics except for one permanent real-property feature. Verified market evidence supports a $67,000 contributory difference: the subject has the feature and the comparable lacks it. Adjust only the comparable toward the subject. What is its adjusted price?
Next Question
A verified pair of cash-equivalent sales in the same market has the superior site/view bundle at $642,000 and a matched property lacking it at $588,000. Rights, terms, time and other material characteristics are matched. A suitable comparable sold for $575,000. The subject is superior in this same feature; the comparable is inferior. Assume the observed contribution applies and no other adjustments. What signed site/view bundle adjustment and adjusted comparable price result?