Three comparables, adjusted for all elements except size, indicate $152, $148 and $150 per square foot. The subject has 2,000 square feet and the appraiser gives equal weight. What value does the unit-price analysis indicate?
Correct Answer
A) $300,000
The average unit price is ($152 + $148 + $150) ÷ 3 = $150 per square foot; $150 × 2,000 = $300,000.
Why This Is the Correct Answer
Option A is correct because the equally weighted average unit price is ($152 + $148 + $150) ÷ 3 = $150 per square foot. Multiplying by the subject's 2,000 square feet gives $150 × 2,000 = $300,000.
Why the Other Options Are Wrong
Option B: $296,000
Option B, $296,000, is wrong because it uses only the lowest unit price: $148 × 2,000 = $296,000. With equal weight, the average is $150 per square foot, giving $300,000.
Option C: $304,000
Option C, $304,000, is wrong because it uses only the highest unit price: $152 × 2,000 = $304,000. Equal weighting gives $150 × 2,000 = $300,000.
Option D: $150,000
Option D, $150,000, is wrong because it applies the average unit price to only half the area: $150 × 1,000 = $150,000. The subject has 2,000 square feet, so the indication is $150 × 2,000 = $300,000.
Average the rate, then multiply
First reconcile the per-unit rate, here by equal weighting, then multiply by the subject's units.
How to use: Use this when a question gives several per-square-foot indications and the subject's size.
Exam Tip
Check whether the question asks for equal weighting; if so, average the unit prices before applying them to the subject's area.
Common Mistakes to Avoid
- -Using the highest or lowest unit price when equal weighting is called for
- -Applying the unit price to the wrong area
- -Applying a unit price before adjusting the comparables for other differences
Concept Deep Dive
Analysis
This question tests using an adjusted unit price to reach a value indication. The three comparables have been adjusted for everything except size, so their per-square-foot indications can be averaged with equal weight and applied to the subject's area. The steps are to average the unit prices, then multiply by 2,000 square feet.
Background Knowledge
Adjusted sale prices can be converted into a unit of comparison, such as price per square foot, and then applied to the subject's units. This approach works best when the comparables have already been adjusted for other differences so the unit price reflects similar properties.
Real-World Application
An appraiser valuing a single-family house adjusts three sales for location, age and condition, then converts each to a price per square foot of living area. She reconciles the unit rates and applies the result to the subject's living area.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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Previous Question
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Reconciliation of the sales comparison approach differs from final reconciliation in that the former: