Paired land sales show a discount of $170,000 for vacant sites near a cattle feedlot. A comparable vacant site without this proximity sold for $800,000. The subject has this proximity, which makes it inferior to the comparable. No other adjustments apply. What is the indicated land value?
Correct Answer
D) $630,000
Adjust the comparable toward the subject: $800,000 − $170,000 = $630,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option D is correct because the subject is inferior, so the comparable is adjusted downward: $800,000 − $170,000 = $630,000. The paired sales discount measures the price effect of the stigma.
Why the Other Options Are Wrong
Option A: $800,000
Option A, $800,000, is the comparable's unadjusted price. It ignores the supported $170,000 discount; the adjusted indication is $800,000 − $170,000 = $630,000.
Option B: $970,000
Option B, $970,000, adds the discount: $800,000 + $170,000 = $970,000. That treats the subject as superior; the correct figure is $800,000 − $170,000 = $630,000.
Option C: $460,000
Option C, $460,000, subtracts the discount twice: $800,000 − $340,000 = $460,000. Only one $170,000 adjustment applies, giving $630,000.
Subject worse, comp goes down
When the subject has a drawback the comparable lacks, subtract the supported amount from the comparable.
How to use: Use this to choose the sign of any proximity or stigma adjustment.
Exam Tip
Apply a single supported adjustment once, in the direction that makes the comparable resemble the subject.
Common Mistakes to Avoid
- -Adding the discount when the subject is inferior
- -Subtracting the discount twice
- -Ignoring a supported external influence
Concept Deep Dive
Analysis
This question tests the direction of a stigma adjustment in vacant land sales comparison. The comparable lacks the feedlot proximity stigma while the subject has it, so the comparable's price must be reduced by the supported $170,000 discount.
Background Knowledge
Adjustments in sales comparison are applied to the comparable to reflect the subject's characteristics. A negative external influence on the subject that the comparable lacks calls for a downward adjustment. Paired sales can isolate the amount of such an influence.
Real-World Application
An appraiser values rural land next to a cattle feedlot. Paired sales of similar parcels near and away from feedlots show a consistent discount, which she subtracts from each unaffected comparable.
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An improved comparable sold for a cash-equivalent $1,250,000. Market allocation evidence supports a typical land-to-total-price ratio of 20% for competitive properties (standard appraisal guidance allocation). Separately, depreciated replacement cost of the improvements (RCNLD) is supported at $960,000, so extraction isolates land as sale price minus RCNLD. What land indications result under allocation versus extraction, and which statement is correct?
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