On a URAR form, if an appraiser makes a $5,000 adjustment for a bathroom count difference between the subject and a comparable, this adjustment should be:
Correct Answer
A) Subtracted from the comparable's sale price if the subject is superior
Why this is correct: The governing principle is that adjustments are always made to the comparable's sale price to make it more equivalent to the subject. If the subject is superior (has more bathrooms), the comparable is inferior. To make the inferior comparable more like the superior subject, you subtract the adjustment amount from the comparable's price. Why the other choices are wrong: Applying as a percentage rather than dollar amount is incorrect because bathroom adjustments on the URAR are typically made as specific dollar amounts. Adding to the comparable's sale price if the subject is superior is wrong because that would make the comparable seem even more inferior. Averaging with other bathroom adjustments in the grid is not a standard URAR procedure; each adjustment is applied individually. Exam tip: Remember the rule: "Adjust the comparable to the subject." If the subject is better, subtract from the comp; if the comp is better, add to the comp.
Why This Is the Correct Answer
Option B is correct because when the subject property is superior to the comparable (has more bathrooms), the adjustment amount must be subtracted from the comparable's sale price. This follows the principle that we adjust the comparable to make it equivalent to the subject property. Since the comparable is inferior (fewer bathrooms), we reduce its sale price by the adjustment amount to reflect this deficiency. The adjustment grid on the URAR always shows adjustments TO the comparables, and a subtraction indicates the comparable is inferior in that feature.
Why the Other Options Are Wrong
SUBTRACT for Superior Subject
Remember 'S.S.' - when the Subject is Superior, you SUBTRACT from the comparable. Think 'Superior Subject = Subtract' - if your house is better, you subtract from the comparable's price to bring it down to reflect its inferiority.
How to use: When you see an adjustment question, first identify which property (subject or comparable) is superior in the feature being adjusted. If the subject is superior, remember 'S.S.' and subtract the adjustment from the comparable's sale price.
Exam Tip
Always identify the direction of adjustment by asking 'Which property is better?' If the subject is better, subtract from the comparable. If the comparable is better, add to the comparable. Never adjust the subject property.
Common Mistakes to Avoid
- -Adding the adjustment when the subject is superior instead of subtracting
- -Trying to adjust the subject property instead of the comparable
- -Confusing the direction of adjustment based on which property has the superior feature
Concept Deep Dive
Analysis
This question tests understanding of the fundamental adjustment principle in the sales comparison approach on the URAR (Uniform Residential Appraisal Report) form. The core concept is that adjustments are always made TO the comparable properties, never to the subject property, to make the comparables more similar to the subject. When the subject property has a superior feature (more bathrooms), the comparable's value must be adjusted upward by subtracting a negative adjustment or adding a positive adjustment. However, the mathematical operation depends on how the adjustment is conceptualized - if the $5,000 represents the value difference, it's subtracted from the comparable's sale price to reflect that the comparable is inferior.
Background Knowledge
The sales comparison approach requires adjusting comparable properties to make them equivalent to the subject property. All adjustments are made TO the comparables, never to the subject, and the direction of adjustment depends on whether the comparable is superior or inferior to the subject in each feature.
Real-World Application
In practice, if you're appraising a 3-bathroom home and your comparable sold for $300,000 but only has 2 bathrooms, you would subtract the bathroom adjustment (say $5,000) from the comparable's sale price, resulting in an adjusted value of $295,000 for comparison purposes.
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?
A lender orders an appraisal for a $300,000 residential loan. After receiving the appraisal, the loan officer contacts the appraiser requesting that certain language be changed to better support the loan approval. This scenario represents a violation of:
How often must appraisers complete continuing education to maintain their license or certification?
Under FIRREA, which federal agency was given the authority to set minimum standards for real estate appraisers performing appraisals in federally related transactions?
How often must licensed and certified appraisers complete continuing education to maintain their credentials according to AQB requirements?
FIRREA was enacted primarily in response to which financial crisis?
In a narrative appraisal report, which section would typically contain the appraiser's analysis of highest and best use?
A narrative appraisal report for a commercial property must include detailed analysis of income, expenses, and capitalization rates. This level of detail is primarily required because:
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In the URAR form, what does the appraiser indicate in the 'Subject' column for site size?
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