The subject is a vacant site near a dairy farm or dairy processing plant. A comparable vacant site without this proximity sold for $830,000. Paired land sales indicate a discount of $170,000 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
B) $660,000
Adjust the comparable toward the subject: $830,000 − $170,000 = $660,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option B is correct because adjustments are made to the comparable to reflect the subject: $830,000 − $170,000 = $660,000. The subject is inferior due to its proximity stigma, so the comparable's price comes down. No other adjustments apply, leaving $660,000 as the indicated land value.
Why the Other Options Are Wrong
Option A: $830,000
Option A, $830,000, is the comparable's unadjusted sale price. It ignores the supported $170,000 stigma discount; the correct result is $830,000 − $170,000 = $660,000.
Option C: $1,000,000
Option C, $1,000,000, adds the discount ($830,000 + $170,000 = $1,000,000), which would treat the subject as superior. Since the subject is inferior, the correct result is $830,000 − $170,000 = $660,000.
Option D: $490,000
Option D, $490,000, deducts the discount twice ($830,000 − $170,000 − $170,000 = $490,000). Only one adjustment applies, so the correct result is $830,000 − $170,000 = $660,000.
Worse Subject, Lower Comparable
If the subject has a problem the comparable lacks, lower the comparable's price. The comparable is reshaped to look like the subject.
How to use: Use this to choose the sign of any adjustment for an external influence.
Exam Tip
Locate the words subject inferior or subject superior in the question. Inferior means subtract from the comparable; superior means add.
Common Mistakes to Avoid
- -Adding a stigma discount to the comparable
- -Applying the discount to the subject rather than the comparable
- -Counting the same adjustment twice
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales adjustment in vacant land comparison. The subject is affected by dairy farm or dairy processing plant proximity stigma, while the comparable is not. Because the subject is inferior, the comparable's price is adjusted downward by the supported $170,000 discount.
Background Knowledge
Proximity to uses that generate odors, noise or other nuisances can be a negative external influence that buyers reflect in lower land prices. Paired sales analysis isolates that effect by comparing otherwise similar sales with and without the influence. The adjustment is applied to the comparable in the direction of the subject.
Real-World Application
An appraiser values a rural residential lot downwind of a dairy operation. Paired sales of nearby lots with and without that exposure show a consistent price gap, which the appraiser deducts from an unaffected comparable's price.
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Which of the following is a legal rather than a physical characteristic of a site?
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An appraiser is extracting site value from three improved sales in a subdivision. Sale 1 sold for $500,000, with improvements contributing $330,000. Sale 2 sold for $540,000, with improvements contributing $365,000. Sale 3 sold for $420,000 in a lender-forced foreclosure, with improvements contributing $330,000, and the appraiser finds no basis for adjusting it. The appraiser concludes to the mean of the usable sales. What is the indicated site value?