The subject is a vacant site near a fish farm or aquaculture facility. A comparable vacant site without this proximity sold for $850,000. Paired land sales indicate a discount of $160,000 for the proximity stigma, which makes the subject inferior to the comparable. No other adjustments apply. What is the indicated land value of the subject?
Correct Answer
A) $690,000
Adjust the comparable toward the subject: $850,000 − $160,000 = $690,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option A is correct because the comparable's $850,000 sale price must be adjusted downward by the $160,000 stigma discount to reflect the subject's inferior location: $850,000 − $160,000 = $690,000. The discount is applied once, and no other adjustments apply.
Why the Other Options Are Wrong
Option B: $850,000
Option B ($850,000) is simply the comparable's unadjusted sale price. It ignores the supported $160,000 proximity stigma discount, so it values the subject as if it had no stigma; the correct figure is $850,000 − $160,000 = $690,000.
Option C: $1,010,000
Option C ($1,010,000) comes from adding the discount: $850,000 + $160,000. That moves the comparable in the wrong direction; because the subject is inferior, the comparable is adjusted down to $850,000 − $160,000 = $690,000.
Option D: $530,000
Option D ($530,000) results from subtracting the $160,000 discount twice: $850,000 − $160,000 − $160,000. The stigma is deducted once, giving $850,000 − $160,000 = $690,000.
Subject worse, comparable down
Picture making the comparable look like the subject: if the subject has a nuisance nearby, you take value away from the comparable.
How to use: Use this whenever a question says the subject is inferior or superior and asks for an adjusted comparable price.
Exam Tip
Before computing, decide the sign of the adjustment from which property is inferior; the distractors usually include the unadjusted price, the wrong-direction result and a double deduction.
Common Mistakes to Avoid
- -Adding the discount because it is described as a positive dollar amount
- -Adjusting the subject instead of the comparable
- -Deducting the stigma discount twice
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales adjustment in vacant land sales comparison. The comparable has no fish farm (aquaculture facility) proximity stigma and the subject does, so the subject is inferior. Adjustments are made to the comparable to make it resemble the subject, which means the comparable price is reduced by the supported discount.
Background Knowledge
In sales comparison, adjustments are applied to the comparable sale, not to the subject. When the subject is inferior in an element of comparison, the comparable's price is adjusted downward; when the subject is superior, it is adjusted upward. Paired sales analysis is one accepted way to support the size of an external influence adjustment such as proximity stigma.
Real-World Application
An appraiser values a vacant residential lot near a fish farm (aquaculture facility). A paired comparison of otherwise similar land sales near and away from such a facility supports a $160,000 discount, so the appraiser subtracts it from a comparable that sold for $850,000 away from the facility.
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