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?
Correct Answer
D) $427,000
Adjust the comparable toward the subject: $505,000 − $78,000 = $427,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option D is correct because the comparable is better than the subject, so its price is reduced by the supported discount: $505,000 − $78,000 = $427,000. Adjustments are made to the comparable property to reflect the subject's inferior location near the quarry or mine.
Why the Other Options Are Wrong
Option A: $505,000
Option A, $505,000, is the comparable's unadjusted sale price. It ignores the supported $78,000 stigma discount; the correct value is $505,000 − $78,000 = $427,000.
Option B: $583,000
Option B, $583,000, adds the discount ($505,000 + $78,000), which would be correct only if the subject were superior. The subject is inferior, so the result is $427,000.
Option C: $349,000
Option C, $349,000, deducts the $78,000 discount twice ($505,000 − $156,000). Only one supported discount applies, giving $427,000.
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
When the subject has a stigma the comparable lacks, the comparable is better and the adjustment is a deduction from its price.
Common Mistakes to Avoid
- -Adding the stigma discount to the comparable
- -Reporting the comparable's sale price without adjustment
- -Deducting the discount twice
Concept Deep Dive
Analysis
This question tests the direction of a sales comparison adjustment for an external influence. The subject suffers a quarry or mining proximity stigma that the comparable does not, so the subject is inferior. The comparable's price is adjusted downward by the supported paired-sales discount.
Background Knowledge
External influences such as nearby quarries or mines can reduce land value through noise, dust, truck traffic, or buyer perception. Appraisers measure such effects from market evidence, such as paired sales of affected and unaffected sites, and apply the supported adjustment to the comparable.
Real-World Application
An appraiser values a vacant residential site a short distance from an active gravel quarry. Paired sales of similar lots near and away from the quarry support a dollar discount, which the appraiser deducts from an unaffected comparable sale.
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Previous Question
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?
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An appraiser is using sales comparison to value a vacant site of 5,200 square feet. Market data show comparable vacant land selling at $55 per square foot. What is the indicated land value?