Paired land sales in a market area show that proximity to a hog farm reduces the price of a vacant site by $170,000. The subject vacant site is next to a hog farm. A comparable vacant site with no hog farm nearby sold for $850,000. No other adjustments apply. What is the indicated value of the subject land?
Correct Answer
D) $680,000
Adjust the comparable toward the subject: $850,000 − $170,000 = $680,000. 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: $850,000 − $170,000 = $680,000. The paired sales discount measures the stigma's price effect.
Why the Other Options Are Wrong
Option A: $850,000
Option A, $850,000, is the comparable's unadjusted price. It ignores the supported $170,000 discount; the adjusted indication is $850,000 − $170,000 = $680,000.
Option B: $1,020,000
Option B, $1,020,000, adds the discount: $850,000 + $170,000 = $1,020,000. That treats the subject as superior; the correct figure is $850,000 − $170,000 = $680,000.
Option C: $510,000
Option C, $510,000, subtracts the discount twice: $850,000 − $340,000 = $510,000. Only one $170,000 adjustment applies, giving $680,000.
Subject worse, comp goes down
If the subject carries a stigma the comparable does not, subtract the supported discount from the comparable.
How to use: Use this to set the sign of external influence adjustments.
Exam Tip
Apply the supported adjustment once, in the direction that makes the comparable resemble the subject.
Common Mistakes to Avoid
- -Adding the discount for an inferior subject
- -Applying the discount twice
- -Leaving the comparable unadjusted despite supported evidence
Concept Deep Dive
Analysis
This question tests the direction of a stigma adjustment. The comparable lacks the hog farm proximity stigma that affects the subject, so the comparable's price must be reduced by the supported $170,000 paired sales discount.
Background Knowledge
Adjustments are made to the comparable so it reflects the subject's characteristics. A negative influence affecting the subject but not the comparable requires a downward adjustment to the comparable. Paired sales are a recognized way to support the amount.
Real-World Application
An appraiser values land near a hog operation. Paired sales show nearby parcels sell at a consistent discount compared with similar parcels farther away, so she subtracts that amount from each unaffected comparable.
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