A vacant site being appraised is near a firearms shooting range. A comparable vacant site that is not near a shooting range sold for $605,000. Paired land sales indicate a discount of $100,000 for proximity to a range. No other adjustments apply. What land value is indicated for the subject?
Correct Answer
A) $505,000
Adjust the comparable toward the subject: $605,000 − $100,000 = $505,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option A is correct because the comparable has no shooting range stigma and is therefore superior to the stigmatized subject. Subtracting the supported $100,000 paired-sales discount gives $605,000 − $100,000 = $505,000. This expresses what the comparable would have sold for with the subject's inferior location.
Why the Other Options Are Wrong
Option B: $605,000
Option B, $605,000, is simply the comparable's unadjusted sale price. It ignores the supported $100,000 stigma discount even though the subject is inferior; the correct result is $605,000 − $100,000 = $505,000.
Option C: $705,000
Option C, $705,000, comes from adding the discount: $605,000 + $100,000. Adding would treat the subject as superior, but the subject suffers the stigma, so the comparable must be adjusted down to $505,000.
Option D: $405,000
Option D, $405,000, deducts the discount twice: $605,000 − $200,000. Only one supported $100,000 discount applies, giving $505,000.
CBS: Comp Better, Subtract
If the comparable is better than the subject, subtract; if the comparable is poorer, add. The adjustment goes on the comparable, not the subject.
How to use: Use this each time you decide the sign of an adjustment in a sales grid.
Exam Tip
Ask which property is better on the item in question; an inferior subject means the comparable gets a minus adjustment.
Common Mistakes to Avoid
- -Adjusting the subject instead of the comparable
- -Adding the discount because the subject is the stigmatized property
- -Leaving the comparable unadjusted when a supported discount exists
Concept Deep Dive
Analysis
This question tests the rule that adjustments are made to the comparable to make it resemble the subject. The comparable lacks the shooting range proximity stigma, so it is superior to the subject. A superior comparable is adjusted downward by the supported paired-sales discount: $605,000 − $100,000.
Background Knowledge
In the sales comparison approach, each comparable is adjusted for differences from the subject. When the comparable is superior in a characteristic, its price is reduced; when inferior, its price is increased. Paired sales analysis is one accepted way to support the amount of an adjustment such as an external stigma.
Real-World Application
An appraiser values a rural lot next to an outdoor shooting range. Paired sales of similar lots near and away from such ranges support a discount, so the appraiser subtracts it from a comparable that sold well away from any range.
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Previous Question
Market data show land prices rising at a straight-line rate of about 4% per year, without compounding. A comparable land sale closed 18 months before the effective date of the appraisal. What market-conditions adjustment is indicated for this sale?
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