The subject is a vacant site near an animal rendering plant. A comparable vacant site that is not near a rendering plant sold for $640,000. Market data from paired land sales indicate a discount of $120,000 for rendering plant proximity. No other adjustments apply. What is the indicated land value of the subject?
Correct Answer
A) $520,000
Adjust the comparable toward the subject: $640,000 − $120,000 = $520,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option A is correct because the comparable is free of rendering plant proximity and therefore superior to the subject. Subtracting the supported $120,000 discount gives $640,000 − $120,000 = $520,000. The adjustment is made to the comparable to reflect the subject's inferior location.
Why the Other Options Are Wrong
Option B: $640,000
Option B, $640,000, is the comparable's unadjusted price. It ignores the supported $120,000 discount; the correct result is $640,000 − $120,000 = $520,000.
Option C: $760,000
Option C, $760,000, adds the discount: $640,000 + $120,000. The subject is the inferior property, so the comparable must be adjusted down to $520,000.
Option D: $400,000
Option D, $400,000, deducts the discount twice: $640,000 − $240,000. Only one supported $120,000 discount applies, giving $520,000.
CBS: Comp Better, Subtract
When the comparable is better than the subject on an item, subtract the difference from the comparable. When worse, add.
How to use: Use this to set the sign of each adjustment in a sales grid.
Exam Tip
If the subject has a negative influence the comparable lacks, expect a downward adjustment to the comparable.
Common Mistakes to Avoid
- -Adding the discount because the subject has the nuisance
- -Deducting the stigma discount twice
- -Using the comparable's raw price without the supported adjustment
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales stigma adjustment. The comparable sold without rendering plant proximity stigma, so it is superior to the subject. The supported discount is subtracted from the comparable's price: $640,000 − $120,000.
Background Knowledge
Proximity to a use that produces odors or other nuisances can create a negative external influence that lowers land value. Paired sales of similar sites with and without the influence help support the amount. The adjustment is applied to the comparable's price, downward when the comparable is superior.
Real-World Application
An appraiser values an acreage parcel within smelling distance of an animal rendering plant. Paired rural land sales near and away from similar plants support a discount, which the appraiser subtracts from an unaffected comparable.
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