The subject is 12 years old and a comparable is 18 years old. Paired sales support $2,400 per year of effective age. What adjustment applies to the comparable?
Correct Answer
A) +$14,400
Why this is correct: the comparable is six years older and therefore inferior. Calculation: (18 - 12) × $2,400 = +$14,400. Why the other choices are wrong: -$14,400 adjusts the older property downward; +$43,200 and +$28,800 apply the rate to the comparable’s full 18 years and the subject’s full 12 rather than to the six-year difference.
Why This Is the Correct Answer
Why this is correct: the comparable is six years older and therefore inferior. Calculation: (18 - 12) × $2,400 = +$14,400. Why the other choices are wrong: -$14,400 adjusts the older property downward; +$43,200 and +$28,800 apply the rate to the comparable’s full 18 years and the subject’s full 12 rather than to the six-year difference.
More Sales Comparison Questions
A property generates $85,000 in Net Operating Income and sells for $1,062,500. What is the overall capitalization rate?
A property has potential gross income of $180,000, vacancy and collection loss of $15,000, and operating expenses of $65,000. What is the Net Operating Income?
A comparable sale occurred 8 months ago for $425,000. Market conditions indicate property values have increased 0.5% per month since that time. What is the adjusted sale price?
A property generates $150,000 in potential gross income. Market data indicates a 7% vacancy rate and operating expenses of 35% of effective gross income. If the cap rate is 9.5%, what is the indicated value?
A property sold for $320,000 one year ago. If market conditions have improved by 6% since that sale, what is the time-adjusted sale price for comparison purposes?
A commercial building cost $2,500,000 to construct. The land value is $600,000. If the building has suffered 15% physical deterioration and 8% functional obsolescence, what is the depreciated cost of the improvements?
A building's gross rent multiplier (GRM) is 120. If the monthly rent is $2,500, what is the indicated value?
In the cost approach, economic obsolescence is characterized as:
The concept of regression in property values means that:
A commercial property has potential gross income of $120,000, vacancy and collection loss of 8%, and operating expenses of $35,000. Using a cap rate of 9.5%, what is the indicated value?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam