An appraiser is valuing a vacant site near a landfill. A similar vacant site that is not affected by the landfill sold for $480,000. Paired land sales indicate that proximity to the landfill lowers site prices by $70,000. No other adjustments apply. What is the indicated value of the subject site?
Correct Answer
B) $410,000
Adjust the comparable toward the subject: $480,000 − $70,000 = $410,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option B is correct because the unaffected comparable sold for $480,000 and the supported landfill stigma discount is $70,000. Since the subject is inferior, the comparable is adjusted downward: $480,000 − $70,000 = $410,000.
Why the Other Options Are Wrong
Option A: $480,000
Option A, $480,000, is the comparable's unadjusted price. It ignores the $70,000 discount; the indication is $480,000 − $70,000 = $410,000.
Option C: $550,000
Option C, $550,000, adds the discount instead of subtracting it: $480,000 + $70,000 = $550,000. Because the comparable is superior, it is adjusted downward to $410,000.
Option D: $340,000
Option D, $340,000, subtracts the discount twice: $480,000 − $140,000 = $340,000. Only one $70,000 adjustment applies, giving $410,000.
Comp better, subtract
If the comparable is free of a nuisance the subject suffers, subtract the nuisance's measured effect from the comparable.
How to use: Use this to choose the direction of any external-influence adjustment.
Exam Tip
Ask which property is better, then adjust the comparable's price toward the subject.
Common Mistakes to Avoid
- -Adding the discount to the comparable
- -Subtracting the discount twice
- -Adjusting the subject instead of the comparable
Concept Deep Dive
Analysis
This question tests adjustment direction for landfill proximity stigma. The comparable lacks the stigma and is superior, so its price is reduced by the supported discount. The result is the indicated value for the inferior subject.
Background Knowledge
Proximity to a landfill is a form of external influence that can reduce land value. Paired sales analysis can measure the effect, and the measured amount is applied to comparables in the appropriate direction.
Real-World Application
An appraiser values a vacant residential lot within view of a landfill. Paired sales show a consistent discount for similar lots near the landfill, so the appraiser deducts that amount from a comparable located away from it.
More Land/Site Questions
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Which fact, if supported by competitive-market evidence, most directly supports a unit-price premium for an otherwise comparable site?
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Previous Question
A vacant site being appraised lies near a waste-to-energy incinerator. A comparable vacant site that is not near an incinerator recently sold for $650,000. Market data from paired land sales indicate a $125,000 discount for incinerator proximity. No other adjustments apply. What land value is indicated for the subject?
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