The subject vacant site is encumbered by wetlands and a setback requirement. A comparable vacant site without a wetlands or setback encumbrance sold for $395,000. Paired land sales show a $48,000 discount for these conditions. No other adjustments are needed. What is the indicated land value of the subject?
Correct Answer
A) $347,000
Adjust the comparable toward the subject: $395,000 − $48,000 = $347,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option A is correct because the subject is inferior to the unencumbered comparable, so the comparable's price is reduced by the paired-sales discount: $395,000 − $48,000 = $347,000. Adjustments are made to the comparable property, not the subject, to indicate what the comparable would have sold for with the subject's characteristics.
Why the Other Options Are Wrong
Option B: $395,000
Option B, $395,000, is the comparable's unadjusted sale price. It ignores the supported $48,000 wetlands and setback discount; the correct value is $395,000 − $48,000 = $347,000.
Option C: $443,000
Option C, $443,000, adds the discount ($395,000 + $48,000), which is the adjustment direction for a superior subject. The subject is inferior, so the correct result is $395,000 − $48,000 = $347,000.
Option D: $299,000
Option D, $299,000, deducts the $48,000 discount twice ($395,000 − $96,000). Only one supported discount applies, giving $347,000.
CBS: comparable better, subtract
If the comparable is better than the subject, subtract from the comparable. If the comparable is inferior, add to it.
How to use: Use this whenever you need to decide the sign of a comparable adjustment.
Exam Tip
Restate the facts as comparable better or comparable worse before adjusting; a subject that is inferior means the comparable is better.
Common Mistakes to Avoid
- -Adjusting the subject instead of the comparable
- -Adding the discount when the subject is inferior
- -Applying the same discount twice
Concept Deep Dive
Analysis
This question tests the direction of a sales comparison adjustment. Adjustments are made to the comparable to reflect how the subject differs. Because the subject is inferior due to wetlands and setback limits, the comparable's price is adjusted downward by the supported discount.
Background Knowledge
In sales comparison, each comparable's price is adjusted for differences from the subject. If the subject is inferior in a characteristic, the comparable's price is adjusted downward; if superior, upward. Paired sales analysis is one way to extract a supported adjustment amount.
Real-World Application
An appraiser values a rural homesite with a wetland area that limits where a house can be placed. Using paired sales of similar sites with and without such limits, the appraiser deducts the supported discount from a nearby unencumbered comparable sale.
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Previous Question
Recent vacant-land sales support a unit price of $42 per square foot for parcels competitive with the subject. The subject site contains 22,500 square feet. Per the unit comparison (sales comparison) application of a market $/sf unit rate to the subject’s size, what land value is indicated?
Next Question
Paired land sales show that vacant sites near a quarry sell at a $78,000 discount. The subject vacant site is near a quarry. A comparable vacant site that is not near a quarry or mining operation sold for $505,000. No other adjustments apply. What is the indicated land value of the subject?