On a URAR form, an appraiser makes a $15,000 adjustment to Comparable Sale #2 for a pool and a $5,000 adjustment for a garage. The net adjustment is $18,000 and the gross adjustment is $22,000. What was the dollar amount of negative adjustments made?
Correct Answer
C) $2,000
Why this is correct: Gross adjustment is the sum of all adjustments ignoring sign (+ or -). Net adjustment is the sum of adjustments considering sign (positive adjustments minus negative adjustments). Given: Positive adjustments total $20,000 ($15k + $5k). Let N = negative adjustments. Net = Positive - Negative = $20,000 - N = $18,000. Therefore, N = $20,000 - $18,000 = $2,000. Why the other choices are wrong: $4,000 might be mistakenly calculated as Gross - Net ($22k - $18k). $20,000 is the total of the positive adjustments given. $7,000 is not supported by the calculation. Exam tip: Remember the formulas: Gross = |sum of all adjustments|. Net = sum of adjustments with signs. Negative adjustments = Total Positive Adjustments - Net Adjustment.
Why This Is the Correct Answer
Option A is correct because we can solve this using the relationship between gross and net adjustments. We know positive adjustments total $20,000 ($15,000 + $5,000). Since net adjustment = positive adjustments - negative adjustments, we have $18,000 = $20,000 - negative adjustments. Therefore, negative adjustments = $20,000 - $18,000 = $2,000. We can verify: gross adjustments = $20,000 + $2,000 = $22,000, which matches the given information.
Why the Other Options Are Wrong
Option A: $4,000
Option A ($4,000) would result in a net adjustment of $16,000 ($20,000 - $4,000) and gross adjustments of $24,000 ($20,000 + $4,000), which doesn't match the given figures of $18,000 net and $22,000 gross.
Option B: $20,000
Option B ($20,000) would result in a net adjustment of $0 ($20,000 - $20,000) and gross adjustments of $40,000 ($20,000 + $20,000), which is completely inconsistent with the given net adjustment of $18,000 and gross adjustment of $22,000.
Option D: $7,000
Option D ($7,000) would result in a net adjustment of $13,000 ($20,000 - $7,000) and gross adjustments of $27,000 ($20,000 + $7,000), which contradicts the stated net adjustment of $18,000 and gross adjustment of $22,000.
The GPN Formula
Remember 'GPN': Gross = Positive + Negative (absolute values), Net = Positive - Negative. Think 'GPS Navigation' - you need to know your Gross Position and Net direction to find where you're going.
How to use: When you see adjustment calculation questions, immediately write down the GPN formula and identify what you know versus what you need to find. Set up the equations: Gross = |Positive| + |Negative| and Net = Positive - Negative.
Exam Tip
Always double-check your adjustment calculations by working backwards - use your answer to verify that both the gross and net adjustment figures match what's given in the question.
Common Mistakes to Avoid
- -Confusing gross and net adjustment definitions
- -Adding negative adjustments instead of subtracting them from positive adjustments
- -Forgetting to use absolute values when calculating gross adjustments
Concept Deep Dive
Analysis
This question tests understanding of gross versus net adjustments in the sales comparison approach on URAR forms. Gross adjustments represent the absolute sum of all adjustments (positive and negative added together), while net adjustments represent the algebraic sum (positive minus negative). The relationship between these two figures reveals the magnitude of negative adjustments that were made to the comparable sale. Understanding this relationship is crucial for proper adjustment analysis and ensuring mathematical accuracy in appraisal reports.
Background Knowledge
In appraisal, gross adjustments represent the sum of absolute values of all adjustments, while net adjustments represent the algebraic sum (positive minus negative). The URAR form requires both calculations to demonstrate the overall magnitude of adjustments and the final adjusted value of each comparable sale.
Real-World Application
In practice, appraisers must carefully track both positive and negative adjustments to ensure the comparable sales are truly similar to the subject property and that total adjustments don't exceed acceptable limits (typically 15-25% gross adjustment threshold).
More Sales Comparison Questions
An appraiser is analyzing three comparable sales with the following data: Sale 1: $350,000 with +$10,000 adjustments; Sale 2: $340,000 with -$5,000 adjustments; Sale 3: $360,000 with -$15,000 adjustments. What are the adjusted sale prices?
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