Paired land sales show a $170,000 discount for vacant sites near a leather tannery. The subject vacant site is near a tannery. A comparable vacant site that is not near one sold for $810,000. No other adjustments apply. What is the indicated land value of the subject?
Correct Answer
A) $640,000
Adjust the comparable toward the subject: $810,000 − $170,000 = $640,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option A is correct because the comparable is adjusted toward the inferior subject: $810,000 − $170,000 = $640,000. The discount comes from paired land sales. With no other adjustments, $640,000 is the indicated land value.
Why the Other Options Are Wrong
Option B: $810,000
Option B, $810,000, is the comparable's unadjusted sale price. It ignores the $170,000 tannery proximity discount; the correct result is $810,000 − $170,000 = $640,000.
Option C: $980,000
Option C, $980,000, adds the discount ($810,000 + $170,000 = $980,000), which would treat the subject as superior. Since the subject is inferior, the correct result is $810,000 − $170,000 = $640,000.
Option D: $470,000
Option D, $470,000, subtracts the discount twice ($810,000 − $170,000 − $170,000 = $470,000). Only one adjustment applies, so the correct result is $810,000 − $170,000 = $640,000.
Nuisance Near Subject, Subtract
When a nuisance affects the subject but not the comparable, subtract its supported effect from the comparable. The comparable then reflects the subject's situation.
How to use: Use this for any external stigma adjustment question.
Exam Tip
Read whether the subject or the comparable carries the stigma. Adjust the comparable in the direction that makes it resemble the subject.
Common Mistakes to Avoid
- -Adding a stigma discount to the comparable
- -Adjusting the subject instead of the comparable
- -Double-counting the adjustment
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales adjustment. The subject is affected by tannery proximity stigma, which the comparable lacks. Because the subject is inferior, the comparable's sale price is adjusted downward by the supported $170,000 discount.
Background Knowledge
Nearby uses that produce odors or pollution can create a negative external influence that lowers site value. Paired sales provide market support for the size of the effect. The adjustment is made to the comparable to reflect the subject's condition.
Real-World Application
An appraiser values a residential lot near an old leather tannery. Paired sales of similar lots nearer and farther from the tannery show a consistent discount, which the appraiser deducts from an unaffected comparable.
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