The subject is a vacant site near a coal-fired power plant. A comparable vacant site without this proximity sold for $740,000. Paired land sales indicate a discount of $150,000 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) $590,000
The comparable is superior to the subject for the stated feature. Apply the market difference downward: $740,000 − $150,000 = $590,000. This result uses the paired-sale evidence given; the feature's mere presence does not create a universal discount.
Why This Is the Correct Answer
Option B is correct because the comparable without the stigma is superior to the subject, so its price is adjusted down by the supported $150,000 discount: $740,000 - $150,000 = $590,000. Adjustments are made to the comparable property, not the subject. The paired-sale evidence supplies the amount.
Why the Other Options Are Wrong
Option A: $740,000
Option A, $740,000, is the comparable's unadjusted sale price. It ignores the supported $150,000 stigma discount; the correct indication is $740,000 - $150,000 = $590,000.
Option C: $890,000
Option C, $890,000, comes from adding the discount: $740,000 + $150,000. That moves in the wrong direction, because the superior comparable must be adjusted down to $590,000.
Option D: $440,000
Option D, $440,000, subtracts the discount twice: $740,000 - $150,000 - $150,000. The supported difference is applied once, giving $740,000 - $150,000 = $590,000.
CBS: comp better, subtract
If the Comparable is Better, Subtract; if the comparable is inferior, add.
How to use: Use this every time you decide the sign of a sales comparison adjustment.
Exam Tip
Identify which property has the advantage before doing any arithmetic, then adjust the comparable toward the subject.
Common Mistakes to Avoid
- -Adding the adjustment when the comparable is superior
- -Adjusting the subject instead of the comparable
- -Applying the discount twice
Concept Deep Dive
Analysis
This question tests the direction of a sales comparison adjustment. Adjustments are made to the comparable, and when the comparable is superior because it lacks the coal plant proximity stigma, its price is adjusted downward. The supported paired-sale discount is applied once.
Background Knowledge
In sales comparison, each comparable's price is adjusted to reflect how the subject differs. If the comparable is better than the subject in some feature, a downward adjustment is made; if it is worse, an upward adjustment is made. Paired sales are one way to support the amount.
Real-World Application
An appraiser valuing a vacant lot near a coal-fired plant finds paired sales showing lots near the plant sell for less than similar lots farther away. The appraiser applies that supported discount to a comparable located away from the plant.
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