A vacant site being appraised is near a steel mill. A comparable vacant site that is not near a steel mill sold for $710,000. Paired land sales indicate a $140,000 discount for proximity to the mill. No other adjustments are needed. What is the indicated value of the subject land?
Correct Answer
D) $570,000
The comparable is superior to the subject for the stated feature. Apply the market difference downward: $710,000 − $140,000 = $570,000. This result rests on the paired-sale evidence; the feature's mere presence does not create a universal discount.
Why This Is the Correct Answer
Option D is correct because the superior comparable is adjusted downward: $710,000 − $140,000 = $570,000. The discount comes from paired land sales and no other adjustments apply.
Why the Other Options Are Wrong
Option A: $710,000
Option A, $710,000, applies no adjustment. The supported $140,000 discount for the subject's inferior location must be deducted, giving $570,000.
Option B: $850,000
Option B, $850,000, adds the discount: $710,000 + $140,000. A superior comparable is adjusted down, giving $570,000.
Option C: $430,000
Option C, $430,000, deducts the discount twice: $710,000 − $280,000. The supported $140,000 applies once, giving $570,000.
CBS: Comp Better, Subtract
When the comparable is better than the subject, subtract. When it is worse, add.
How to use: Use CBS to set the sign of each adjustment before calculating.
Exam Tip
Watch for answers that add instead of subtract or double the adjustment. Only one answer applies the stated amount once in the right direction.
Common Mistakes to Avoid
- -Adding the discount to a superior comparable
- -Doubling the adjustment
- -Leaving the comparable unadjusted despite market evidence
Concept Deep Dive
Analysis
This question tests applying a supported proximity discount to a superior comparable. The comparable is not near the steel mill while the subject is, so the comparable is superior. Subtract the paired-sale discount once from the comparable's price.
Background Knowledge
A heavy industrial neighbor is an external influence that may reduce land value when the market reacts to noise, traffic or emissions. The amount must be measured from market data. Adjustments convert the comparable's price into an indication for the subject.
Real-World Application
An appraiser valuing a parcel near a steel plant finds that paired sales show a market discount for nearby sites. She deducts that amount from a comparable outside the plant's influence.
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