An appraiser is valuing a vacant site near a natural gas compressor station. A comparable vacant site without this proximity sold for $790,000. Paired land sales indicate that the proximity stigma lowers value by $170,000, so the subject is inferior to the comparable. No other adjustments apply. What land value is indicated?
Correct Answer
D) $620,000
Adjust the comparable toward the subject: $790,000 − $170,000 = $620,000. 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: $790,000 − $170,000 = $620,000. The paired sales discount measures the stigma's price effect.
Why the Other Options Are Wrong
Option A: $790,000
Option A, $790,000, is the comparable's unadjusted price. It ignores the supported $170,000 discount; the adjusted indication is $790,000 − $170,000 = $620,000.
Option B: $960,000
Option B, $960,000, adds the discount: $790,000 + $170,000 = $960,000. That treats the subject as superior; the correct figure is $790,000 − $170,000 = $620,000.
Option C: $450,000
Option C, $450,000, subtracts the discount twice: $790,000 − $340,000 = $450,000. Only one $170,000 adjustment applies, giving $620,000.
Subject worse, comp goes down
A stigma on the subject but not the comparable means subtracting the supported discount from the comparable.
How to use: Use this to set the sign of proximity adjustments.
Exam Tip
Apply one supported adjustment in the direction that makes the comparable look like the subject.
Common Mistakes to Avoid
- -Adding the discount for an inferior subject
- -Applying the discount twice
- -Adjusting the subject rather than the comparable
Concept Deep Dive
Analysis
This question tests the direction of a stigma adjustment. The comparable lacks the compressor station proximity stigma that affects the subject, so the comparable's price is reduced by the supported $170,000 paired sales discount.
Background Knowledge
In sales comparison, the comparable is adjusted to reflect the subject's characteristics. When the subject is affected by a negative external influence the comparable lacks, the comparable's price is adjusted downward. Paired sales help isolate the amount.
Real-World Application
An appraiser values land near a natural gas compressor station. Paired sales of similar parcels near and away from such facilities show a consistent discount, which she applies to each unaffected comparable.
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