Verified effective ages are 12 years for the subject and 18 years for the comparable. Market evidence supports an upward $2,400 per year when adjusting the older comparable to the subject’s lower effective age over this range. What signed adjustment results?
Correct Answer
A) $14,400
(18 − 12) × 2400 = +14400. The exercise supplies effective ages and an applicable contribution rate; actual construction age alone would not establish this adjustment.
Why This Is the Correct Answer
Option A is correct because the effective age difference is 18 − 12 = 6 years, and 6 × $2,400 = $14,400. The comparable is older and inferior to the subject, so the adjustment is positive. The stem provides effective ages and a supported market rate for this range.
Why the Other Options Are Wrong
Option B: −$14,400
Option B shows −$14,400, which uses the correct amount but the wrong sign. The older comparable is inferior to the subject, so it is adjusted upward by +$14,400.
Option C: $43,200
Option C shows $43,200, which multiplies the comparable's full effective age by the rate: 18 × $2,400 = $43,200. Only the 6-year difference is adjusted, giving 6 × $2,400 = $14,400.
Option D: $28,800
Option D shows $28,800, which multiplies the subject's effective age by the rate: 12 × $2,400 = $28,800. The adjustment uses the difference between ages, (18 − 12) × $2,400 = $14,400.
Multiply the gap, not the age
Age adjustments use the difference between the two effective ages times the rate.
How to use: Use this to avoid multiplying a whole age by the rate.
Exam Tip
Check the sign last: an older or worse comparable gets a plus adjustment toward a newer or better subject.
Common Mistakes to Avoid
- -Using a negative sign for an inferior comparable
- -Multiplying the full effective age instead of the difference
- -Using actual age when effective age is what the market reacts to
Concept Deep Dive
Analysis
This question tests effective age adjustment arithmetic and sign. The comparable is older in effective age than the subject, so it is inferior and adjusts upward. The adjustment is the age difference times the supported rate.
Background Knowledge
Effective age reflects a property's condition and utility rather than its chronological age. Adjustments for age or condition differences should be based on market evidence. Adjustments are made to the comparable, upward when it is inferior and downward when it is superior.
Real-World Application
An appraiser rates the subject at an effective age of 12 years after recent updates and a comparable at 18 years. Paired sales show about $2,400 per year of effective age in this range, so she adds $14,400 to the comparable.
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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?