The subject is a vacant site with an irregular shape. A comparable vacant site with a regular shape sold for $395,000. Paired land sales indicate a discount of $57,000 for an irregular shape. No other adjustments apply. What is the indicated land value of the subject?
Correct Answer
D) $338,000
Adjust the comparable toward the subject: $395,000 − $57,000 = $338,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option D is correct because the comparable is superior to the subject, so its price is reduced to reflect the subject's irregular shape. The calculation is $395,000 − $57,000 = $338,000. Adjustments are applied to the comparable, not the subject.
Why the Other Options Are Wrong
Option A: $395,000
Option A, $395,000, is the unadjusted comparable price. It ignores the supported $57,000 irregular-shape discount; the correct indication is $395,000 − $57,000 = $338,000.
Option B: $452,000
Option B, $452,000, adds the discount instead of subtracting it: $395,000 + $57,000 = $452,000. A subject inferior to the comparable calls for a downward adjustment, giving $338,000.
Option C: $281,000
Option C, $281,000, deducts the discount twice: $395,000 − (2 × $57,000) = $281,000. The discount is applied once, giving $395,000 − $57,000 = $338,000.
CBS: Comp Better, Subtract
If the Comp is Better than the subject, Subtract; if the comp is worse, add. The adjustment goes on the comparable.
How to use: Use this before deciding the sign of any adjustment in a sales comparison grid.
Exam Tip
Identify which site has the drawback: if only the subject has it, the comparable is superior and gets a downward adjustment.
Common Mistakes to Avoid
- -Adjusting the subject instead of the comparable
- -Adding the discount when the comparable is superior
- -Applying the same adjustment twice
Concept Deep Dive
Analysis
This question tests the direction of a sales comparison adjustment. Adjustments are made to the comparable to make it resemble the subject. Because the subject is inferior (irregular shape) and the comparable is regular, the comparable's price is adjusted downward by the paired-sales discount.
Background Knowledge
In sales comparison, each comparable's price is adjusted for differences from the subject. If the comparable is superior, its price is adjusted down; if inferior, up. Paired sales analysis is one recognized way to extract and support the size of an adjustment.
Real-World Application
An appraiser valuing an irregular, pie-shaped residential lot finds a recent sale of a rectangular lot nearby. Using paired sales of regular and irregular lots in the area, she supports a dollar discount and subtracts it from the rectangular lot's price.
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