The subject is a vacant site near a slaughterhouse. A comparable vacant site that is not near a slaughterhouse sold for $820,000, and paired land sales show a $170,000 discount for that proximity. No other adjustments apply. What is the indicated land value of the subject?
Correct Answer
D) $650,000
Adjust the comparable toward the subject: $820,000 − $170,000 = $650,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option D is correct because the comparable is free of the slaughterhouse stigma and therefore superior to the subject. Deducting the supported $170,000 paired-sales discount gives $820,000 − $170,000 = $650,000. Adjustments are made to the comparable to reflect the subject's characteristics.
Why the Other Options Are Wrong
Option A: $820,000
Option A, $820,000, is the comparable's unadjusted price. It ignores the supported $170,000 discount for the subject's inferior location; the correct result is $820,000 − $170,000 = $650,000.
Option B: $990,000
Option B, $990,000, adds the discount: $820,000 + $170,000. Adding would treat the subject as superior, but the subject bears the stigma, so the comparable must be reduced to $650,000.
Option C: $480,000
Option C, $480,000, deducts the discount twice: $820,000 − $340,000. Only one supported $170,000 discount applies, giving $650,000.
CBS: Comp Better, Subtract
When the comparable is better than the subject, subtract the difference from the comparable's price. When it is worse, add.
How to use: Use this to set the sign of each line item in a sales adjustment grid.
Exam Tip
An inferior subject means the comparable is superior, so the comparable receives a downward adjustment.
Common Mistakes to Avoid
- -Adding the discount because the subject has the problem
- -Applying the stigma discount twice
- -Adjusting the subject's value instead of the comparable's price
Concept Deep Dive
Analysis
This question tests the direction of an external stigma adjustment derived from paired sales. The comparable sold without the slaughterhouse proximity stigma, so it is superior to the subject. A superior comparable is adjusted downward by the supported discount: $820,000 − $170,000.
Background Knowledge
A negative external influence, such as proximity to an objectionable use, can reduce land value. Paired sales of otherwise similar properties with and without the influence can isolate and support the size of the adjustment. The adjustment is applied to the comparable's price in the direction that makes it resemble the subject.
Real-World Application
An appraiser values a residential lot near a meat processing plant. Paired sales of similar lots near and away from such plants support a discount, which the appraiser subtracts from a comparable located away from the plant.
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Vacant land may be valued by a multi-comparable median unit price ($/SF of site) applied to the subject’s site area. Five similar vacant comps support unit prices of $34, $36, $38, $40, and $43 per square foot. Subject contains 15,000 SF. What indicated land value by median $/SF results?
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