A comparable land sale closed at $290,000 twelve months before the effective date. Verified market evidence supports a total 10% price increase over that interval. With no other adjustments, what is the market-conditions-adjusted price?
Correct Answer
C) $319,000
Time-adjusted price = $290,000 × (1 + 0.10) = $319,000. The indicated value is $319,000. This is the result under the stated inputs, not a universal market ratio or an approval of a proposed development. Common errors: adjusting downward instead of upward gives $261,000; not applying the market-conditions adjustment gives $290,000; grossing up by dividing by 0.90 gives $322,222.
Why This Is the Correct Answer
Option C is correct because market evidence shows a total 10% increase over the 12 months since the sale. The time-adjusted price is $290,000 × (1 + 0.10) = $319,000, reflecting what the comparable would bring under current market conditions.
Why the Other Options Are Wrong
Option A: $261,000
Option A, $261,000, adjusts downward instead of upward: $290,000 × (1 − 0.10) = $261,000. Prices rose, so the correct figure is $290,000 × 1.10 = $319,000.
Option B: $290,000
Option B, $290,000, is the original sale price with no market conditions adjustment. The verified 10% increase must be applied, giving $319,000.
Option D: $322,222
Option D, $322,222, grosses up by dividing by 0.90: $290,000 ÷ (1 − 0.10) = $322,222. A 10% increase is applied by multiplying by 1.10, giving $319,000.
Rising market, raise the comp
If prices went up since the comparable sold, bring its price up to today by multiplying by one plus the change.
How to use: Use this to choose the direction and method of a time adjustment.
Exam Tip
A stated total increase is applied as price × (1 + rate); dividing by (1 − rate) gives a different, incorrect figure.
Common Mistakes to Avoid
- -Adjusting downward in a rising market
- -Dividing by (1 − rate) instead of multiplying by (1 + rate)
- -Leaving an older sale unadjusted when evidence shows a price change
Concept Deep Dive
Analysis
This question tests a market conditions (time) adjustment. Prices rose 10% over the interval, so the older sale is adjusted upward by multiplying by 1.10. The common traps are adjusting the wrong direction or dividing instead of multiplying.
Background Knowledge
Market conditions adjustments account for changes in prices between a comparable's sale date and the effective date of the appraisal. They must be supported by evidence such as repeat sales or paired sales over time.
Real-World Application
An appraiser uses a land sale from a year ago in a market where verified resales show prices up about 10%. The appraiser adjusts the old sale price upward by that supported percentage before comparing it to the subject.
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Using the allocation method, market evidence supports a typical land-to-total-property-value ratio of 28% for similar improved properties in the subject’s location. An improved comparable sold for $825,000. What land (site) contribution is indicated by applying that ratio?
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