The subject is a vacant site near a pulp and paper mill. A comparable vacant site that is not near such a mill sold for $720,000. Paired land sales indicate a discount of $140,000 for proximity to the mill. No other adjustments apply. What is the indicated land value of the subject?
Correct Answer
D) $580,000
The comparable is superior to the subject for the stated feature. Apply the market difference downward: $720,000 − $140,000 = $580,000. 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 comparable without the paper mill stigma is superior, so its price is reduced by the supported $140,000: $720,000 - $140,000 = $580,000. Adjustments are made to the comparable property, not the subject. The paired sales provide the amount.
Why the Other Options Are Wrong
Option A: $720,000
Option A, $720,000, is the comparable's unadjusted price. It ignores the supported $140,000 stigma discount; the correct indication is $720,000 - $140,000 = $580,000.
Option B: $860,000
Option B, $860,000, adds the discount: $720,000 + $140,000. That adjusts the superior comparable in the wrong direction; the correct result is $580,000.
Option C: $440,000
Option C, $440,000, subtracts the discount twice: $720,000 - $140,000 - $140,000. Applied once, the indication is $720,000 - $140,000 = $580,000.
CBS: comp better, subtract
If the Comparable is Better, Subtract; if the comparable is inferior, add.
How to use: Use this whenever you need the sign of a sales comparison adjustment.
Exam Tip
When the subject has a negative influence the comparable lacks, expect a downward adjustment to the comparable.
Common Mistakes to Avoid
- -Adding the discount to a superior comparable
- -Applying the discount twice
- -Assuming a stigma discount without market support
Concept Deep Dive
Analysis
This question tests adjustment direction for a negative external influence. The comparable has no paper mill stigma, so it is superior to the subject and its price is reduced by the supported paired-sale discount. The discount applies once.
Background Knowledge
Industrial neighbors such as paper or pulp mills may create odor, noise or perception issues that the market discounts. When paired sales support a discount, it is applied to comparables that do not share the influence.
Real-World Application
An appraiser values a vacant parcel downwind of a pulp mill. Paired sales show lots near the mill sell for less, so the appraiser reduces the price of a comparable located far from the mill.
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Sales of adjoining land indicate a unit value of $12 per square foot for the subject's 22,000 square feet. Before any separate corridor, assemblage or rights adjustment, what is the preliminary indication by area?
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