Comparable cash price is $290,000 with 2,000 sf GLA. Subject GLA is 2,100 sf and a supported marginal adjustment rate $75/sf applies only to their difference. No other adjustments apply. What adjusted comparable price results?
Correct Answer
C) $297,500
290000+(2100−2000)×75=297500. Common errors: subtracting the adjustment instead of adding it gives $282,500; leaving out the GLA adjustment gives $290,000; applying the rate to the subject’s whole GLA instead of the difference gives $447,500.
Why This Is the Correct Answer
Option C is correct because the subject has 2,100 sf and the comparable has 2,000 sf, a difference of 100 sf. Applying the supported marginal rate gives 100 x $75 = $7,500. Since the comparable is smaller than the subject, the adjustment is added: $290,000 + $7,500 = $297,500.
Why the Other Options Are Wrong
Option A: $282,500
Option A, $282,500, comes from subtracting the adjustment instead of adding it: $290,000 - (100 x $75) = $282,500. The comparable is smaller than the subject, so it must be adjusted upward to $290,000 + $7,500 = $297,500.
Option B: $290,000
Option B, $290,000, simply leaves out the GLA adjustment. The stem gives a supported $75/sf marginal rate for the 100 sf difference, so the comparable must be adjusted to $290,000 + $7,500 = $297,500.
Option D: $447,500
Option D, $447,500, applies the rate to the subject's whole GLA: $290,000 + 2,100 x $75 = $290,000 + $157,500 = $447,500. The marginal rate applies only to the 100 sf difference, so the correct result is $290,000 + 100 x $75 = $297,500.
Comp Inferior, Price Up
If the comparable lacks something the subject has, add its value to the comparable; if the comparable has more, subtract. Multiply the rate by the difference, not the whole size.
How to use: Use this whenever you must decide the sign of a grid adjustment and the quantity to multiply.
Exam Tip
First find the difference in the feature, then multiply by the rate, then decide the sign by asking whether the comparable is better or worse than the subject.
Common Mistakes to Avoid
- -Adjusting the comparable in the wrong direction when it is smaller than the subject
- -Multiplying the rate by the subject's total GLA instead of the size difference
- -Leaving out a supported adjustment that the facts require
Concept Deep Dive
Analysis
This question tests the direction and basis of a gross living area adjustment in the sales comparison grid. Adjustments are made to the comparable to make it resemble the subject, and the supported marginal rate applies only to the size difference. Because the subject is 100 square feet larger, the comparable is inferior in size and its price is adjusted upward.
Background Knowledge
In the sales comparison approach, each comparable's price is adjusted for differences from the subject so that it indicates what the comparable would have sold for with the subject's characteristics. A marginal size adjustment rate reflects the market's reaction to added or missing area, and it is applied only to the difference in area.
Real-World Application
An appraiser has a 2,000 sf closed sale for a 2,100 sf subject in the same subdivision. Paired data support about $75 per square foot for size differences of this range, so the appraiser enters a +$7,500 adjustment on the comparable's GLA line.
More Sales Comparison Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
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