An appraiser is valuing a vacant site near a gypsum manufacturing plant. A comparable vacant site that is not near such a plant sold for $910,000, and paired land sales show a $150,000 discount for proximity to the plant. No other adjustments are needed. What is the indicated land value of the subject?
Correct Answer
C) $760,000
Adjust the comparable toward the subject: $910,000 − $150,000 = $760,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option C is correct because the comparable is adjusted toward the inferior subject: $910,000 − $150,000 = $760,000. The discount is supported by paired land sales. No other adjustments apply, so $760,000 is the indicated land value.
Why the Other Options Are Wrong
Option A: $910,000
Option A, $910,000, is the comparable's unadjusted sale price. It ignores the $150,000 gypsum plant proximity discount; the correct result is $910,000 − $150,000 = $760,000.
Option B: $1,060,000
Option B, $1,060,000, adds the discount ($910,000 + $150,000 = $1,060,000), which would treat the subject as superior. Since the subject is inferior, the correct result is $910,000 − $150,000 = $760,000.
Option D: $610,000
Option D, $610,000, subtracts the discount twice ($910,000 − $150,000 − $150,000 = $610,000). Only one adjustment applies, so the correct result is $910,000 − $150,000 = $760,000.
Comp Becomes the Subject
Each adjustment transforms the comparable into the subject. If the subject suffers a stigma, the transformed comparable is worth less.
How to use: Use this to decide whether to add or subtract any adjustment.
Exam Tip
Identify which property has the negative influence and adjust the comparable accordingly. Watch for choices that double the adjustment.
Common Mistakes to Avoid
- -Adding a stigma discount to the comparable
- -Using the comparable's unadjusted price
- -Applying the adjustment twice
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales adjustment. The subject is affected by gypsum plant proximity stigma, which the comparable lacks. Because the subject is inferior, the comparable's price is reduced by the supported $150,000 discount.
Background Knowledge
Proximity to industrial plants can create a negative external influence on a site through dust, noise, traffic or perceived risk. Paired sales analysis measures the market's reaction by comparing 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 lot near a gypsum manufacturing plant. Paired sales of similar lots at different distances from the plant show a consistent discount, which the appraiser subtracts from an unaffected comparable's price.
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