A comparable vacant site sold for $530,000. Unlike the comparable, the subject site is near an electrical utility substation, which makes it inferior. Paired land sales show a proximity stigma discount of $79,000. No other adjustments apply. What is the indicated value of the subject site?
Correct Answer
A) $451,000
The comparable is superior to the subject for the stated feature. Apply the market difference downward: $530,000 − $79,000 = $451,000. This result uses the paired-sale evidence given; the feature's mere presence does not create a universal discount.
Why This Is the Correct Answer
Option A is correct because the comparable without the substation stigma is superior to the subject, so its price is reduced by the supported $79,000: $530,000 - $79,000 = $451,000. Adjustments are made to the comparable, not the subject. The amount comes from the paired-sale evidence.
Why the Other Options Are Wrong
Option B: $530,000
Option B, $530,000, is the comparable's unadjusted price. It ignores the supported $79,000 discount; the correct indication is $530,000 - $79,000 = $451,000.
Option C: $609,000
Option C, $609,000, adds the discount: $530,000 + $79,000. That moves the superior comparable the wrong way; it should be adjusted down to $451,000.
Option D: $372,000
Option D, $372,000, subtracts the discount twice: $530,000 - $79,000 - $79,000. The supported difference applies once, giving $530,000 - $79,000 = $451,000.
CBS: comp better, subtract
If the Comparable is Better, Subtract; if the comparable is inferior, add.
How to use: Use this to set the sign of any sales comparison adjustment.
Exam Tip
A comparable that lacks a negative influence affecting the subject is superior and receives a downward adjustment.
Common Mistakes to Avoid
- -Adding the discount to a superior comparable
- -Assuming every substation creates a discount without market evidence
- -Subtracting the discount twice
Concept Deep Dive
Analysis
This question tests adjustment direction for a proximity stigma. The comparable lacks the substation stigma, so it is superior and its price is adjusted downward by the supported paired-sale discount. The discount is applied once.
Background Knowledge
External influences such as nearby utility substations can affect land value when the market reacts to them. Paired sales of otherwise similar sites with and without the influence are a recognized way to measure the effect, which is then applied as an adjustment to the comparable.
Real-World Application
An appraiser values a lot next to an electrical substation. Paired sales in the area show a measurable discount for such lots, so the appraiser reduces the price of a comparable located away from the substation.
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