An appraiser is valuing a vacant site with soil contamination and resulting environmental stigma. A comparable vacant site with neither condition sold for $420,000. Paired land sales indicate a $52,000 discount for the contamination and stigma. No other adjustments apply. What is the indicated value of the subject site?
Correct Answer
A) $368,000
Adjust the comparable toward the subject: $420,000 − $52,000 = $368,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option A is correct because the comparable is superior to the contaminated subject, so its price is reduced by the paired-sales discount: $420,000 − $52,000 = $368,000. Adjusting the comparable toward the subject in this way gives the indicated land value.
Why the Other Options Are Wrong
Option B: $420,000
Option B, $420,000, is wrong because it is the comparable's unadjusted price and ignores the supported $52,000 contamination/stigma discount. The correct indication is $420,000 − $52,000 = $368,000.
Option C: $472,000
Option C, $472,000, is wrong because it adds the discount ($420,000 + $52,000) as if the subject were superior. The subject is inferior, so the correct result is $420,000 − $52,000 = $368,000.
Option D: $316,000
Option D, $316,000, is wrong because it deducts the $52,000 discount twice ($420,000 − $104,000). Only one supported adjustment applies, giving $420,000 − $52,000 = $368,000.
Comparable better, subtract
If the comparable is better than the subject, take value away from the comparable; if it is worse, add value to it.
How to use: Use this rule each time you decide the sign of an adjustment in a sales grid.
Exam Tip
Identify which property has the problem before calculating. An inferior subject means the comparable's price moves down.
Common Mistakes to Avoid
- -Adding the discount when the subject is inferior
- -Applying the adjustment to the subject instead of the comparable
- -Reporting the comparable's unadjusted price
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales adjustment in vacant-land sales comparison. Adjustments are made to the comparable to make it resemble the subject; because the subject suffers contamination/stigma and the comparable does not, the comparable's price must be adjusted downward by the supported discount.
Background Knowledge
In sales comparison, adjustments are applied to the comparable, not the subject. When the subject is inferior in some feature, the comparable's price is adjusted downward; when the subject is superior, it is adjusted upward. Paired sales analysis is one recognized way to support the size of an adjustment.
Real-World Application
An appraiser values a vacant residential lot with documented soil contamination. Paired sales of clean and contaminated sites in the area support a discount, which the appraiser subtracts from a clean comparable's sale price to indicate the subject's value.
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