Paired land sales show a discount of $125,000 for vacant sites near a chemical manufacturing plant. A comparable vacant site without this proximity sold for $655,000. The subject has this proximity, which makes it inferior to the comparable. No other adjustments apply. What is the indicated land value?
Correct Answer
C) $530,000
Adjust the comparable toward the subject: $655,000 − $125,000 = $530,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option C is correct because the subject is inferior, so the comparable is adjusted downward: $655,000 − $125,000 = $530,000. The paired sales discount measures the stigma's effect on price.
Why the Other Options Are Wrong
Option A: $655,000
Option A, $655,000, is the comparable's unadjusted price. It ignores the supported $125,000 stigma discount; the adjusted indication is $655,000 − $125,000 = $530,000.
Option B: $780,000
Option B, $780,000, adds the discount: $655,000 + $125,000 = $780,000. That treats the subject as superior; an inferior subject requires $655,000 − $125,000 = $530,000.
Option D: $405,000
Option D, $405,000, subtracts the discount twice: $655,000 − $250,000 = $405,000. Only one $125,000 adjustment applies, giving $530,000.
Subject worse, comp goes down
If the subject is inferior, subtract from the comparable; if superior, add to it.
How to use: Use this to set the sign of every comparable adjustment.
Exam Tip
Ask how the comparable compares to the subject before choosing the sign; adjust the comparable, not the subject.
Common Mistakes to Avoid
- -Adding the adjustment when the subject is inferior
- -Applying the adjustment twice
- -Adjusting the subject instead of the comparable
Concept Deep Dive
Analysis
This question tests the direction of a sales comparison adjustment. Adjustments are made to the comparable to reflect the subject. Since the subject suffers the chemical plant proximity stigma and the comparable does not, the comparable's price is reduced by the supported $125,000 discount.
Background Knowledge
In sales comparison, adjustments are applied to the comparable property to estimate what it would have sold for with the subject's characteristics. When the subject is inferior, the comparable's price is adjusted downward. Paired sales analysis is one recognized way to support the amount.
Real-World Application
An appraiser values a vacant industrial lot near a chemical plant. Paired sales show similar lots near the plant sold for less than those farther away, so she reduces each unaffected comparable by the supported amount.
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Previous Question
A comparable commercial site with 65 front feet sold for a cash-equivalent price of $585,000. Per standard appraisal guidance, sale price per front foot is a vacant-land unit of comparison when frontage is a primary value determinant. The subject site has 72 front feet and is otherwise similar. What indicated land value does the front-foot unit support before other adjustments?
Next Question
An improved comparable sold for a cash-equivalent $1,250,000. Market allocation evidence supports a typical land-to-total-price ratio of 20% for competitive properties (standard appraisal guidance allocation). Separately, depreciated replacement cost of the improvements (RCNLD) is supported at $960,000, so extraction isolates land as sale price minus RCNLD. What land indications result under allocation versus extraction, and which statement is correct?