A comparable vacant site sold for $690,000. Unlike the comparable, the subject site is near a metal foundry, which makes it inferior. Paired land sales show a proximity stigma discount of $140,000. No other adjustments apply. What is the indicated value of the subject site?
Correct Answer
C) $550,000
Adjust the comparable toward the subject: $690,000 − $140,000 = $550,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option C is correct because the comparable is free of foundry proximity and therefore superior to the subject. Deducting the supported $140,000 discount gives $690,000 − $140,000 = $550,000. The adjustment makes the comparable reflect the subject's inferior location.
Why the Other Options Are Wrong
Option A: $690,000
Option A, $690,000, is the comparable's unadjusted price. It ignores the $140,000 supported discount; the correct result is $690,000 − $140,000 = $550,000.
Option B: $830,000
Option B, $830,000, adds the discount: $690,000 + $140,000. The subject is the inferior property, so the comparable must be adjusted down to $550,000.
Option D: $410,000
Option D, $410,000, deducts the discount twice: $690,000 − $280,000. Only one supported $140,000 discount applies, giving $550,000.
CBS: Comp Better, Subtract
A comparable that is better than the subject gets a minus; one that is worse gets a plus.
How to use: Use this to decide the sign of any adjustment in the sales comparison approach.
Exam Tip
Identify which property has the negative influence; if it is the subject, subtract the discount from the comparable.
Common Mistakes to Avoid
- -Adding the stigma discount to the comparable
- -Applying the same discount twice
- -Using the unadjusted comparable price as the subject value
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales stigma adjustment. The comparable has no foundry proximity stigma, making it superior to the subject. The supported discount is subtracted from the comparable's price: $690,000 − $140,000.
Background Knowledge
Proximity to an industrial nuisance can create a negative external influence that reduces land value. Paired sales help isolate the effect by comparing otherwise similar sales with and without the influence. The resulting adjustment is applied to comparables, downward when the comparable is superior.
Real-World Application
An appraiser values a lot downwind of a metal foundry. Paired sales of lots near and away from similar foundries support a dollar discount, which the appraiser deducts from a comparable that sold in an unaffected area.
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Previous Question
For a vacant site, an office use would be worth $2,400,000 when complete and cost $1,950,000 to produce, including entrepreneurial incentive. A retail use would be worth $1,800,000 and cost $1,450,000. Which use and land value does this test support?
Next Question
The subject is a vacant site near a telecom cell tower. A comparable vacant site without this proximity sold for $550,000. Paired land sales indicate a discount of $83,000 for the proximity stigma, which makes the subject inferior to the comparable. No other adjustments apply. What is the indicated land value of the subject?