Three comparables are equally verified and their adjustments are equally well supported, so the appraiser ranks them by gross adjustment as a percentage of sale price, smallest first. Comparable 1 sold for $350,000 with adjustments of +$10,500 and -$7,000. Comparable 2 sold for $340,000 with +$20,400 and -$18,700. Comparable 3 sold for $500,000 with a single -$22,000 adjustment. What is the ranking?
Correct Answer
A) Comparable 3, Comparable 1, Comparable 2
Gross percentages are Comparable 1: $17,500 / $350,000 = 5.0%; Comparable 2: $39,100 / $340,000 = 11.5%; Comparable 3: $22,000 / $500,000 = 4.4%, so the order is 3, 1, 2. Ranking by gross dollars gives 1, 3, 2 because it ignores the different price levels; ranking by net percentage (0.5%, 1.0%, 4.4%) gives 2, 1, 3 because offsetting adjustments hide how much Comparable 2 was changed; ranking by signed net puts the downward-adjusted Comparable 3 first and then 2, 1. Fannie Mae notes that the ideal comparable needs no adjustment, so the sale needing the least total change is the closest.
Why This Is the Correct Answer
Option A is correct because the gross percentages are 4.4% for Comparable 3 ($22,000 / $500,000), 5.0% for Comparable 1 ($17,500 / $350,000) and 11.5% for Comparable 2 ($39,100 / $340,000). Ranked smallest first, the order is 3, 1, 2.
Why the Other Options Are Wrong
Option B: Comparable 1, Comparable 3, Comparable 2
Option B, Comparable 1, Comparable 3, Comparable 2, ranks by gross dollars: $17,500, $22,000 and $39,100. Because Comparable 3 sold for much more, its $22,000 is only 4.4% of price, less than Comparable 1 at 5.0%.
Option C: Comparable 2, Comparable 1, Comparable 3
Option C, Comparable 2, Comparable 1, Comparable 3, ranks by net percentage: 0.5%, 1.0% and 4.4%. Comparable 2 looks closest only because +$20,400 and -$18,700 nearly cancel; its gross adjustment is 11.5%, the largest.
Option D: Comparable 3, Comparable 2, Comparable 1
Option D, Comparable 3, Comparable 2, Comparable 1, ranks by signed net percentage, lowest first: -4.4%, +0.5% and +1.0%. A negative sign shows direction, not closeness, and the gross ranking is 3 (4.4%), 1 (5.0%), 2 (11.5%).
Absolute, then divide
Strip the signs, add, then divide by each sale price before ranking. Dollars and net figures can both mislead.
How to use: Use this whenever you rank comparables of different prices by how much adjustment they needed.
Exam Tip
Watch for a comparable whose large adjustments offset each other: its net figure looks small, but its gross figure tells the real story.
Common Mistakes to Avoid
- -Ranking by gross dollars without scaling to sale price
- -Treating a small net adjustment as proof of close comparability
- -Treating a negative net adjustment as smaller than a positive one
Concept Deep Dive
Analysis
Two steps are needed: compute each gross total by adding absolute values, then scale by each sale price so the comparables can be compared fairly. The distractors each come from a shortcut, using dollars instead of percentages or using net figures in which offsetting adjustments cancel.
Background Knowledge
When comparables are otherwise equally reliable, the one that required the least total adjustment is usually the closest substitute for the subject. Gross adjustment as a percentage of sale price captures total change and puts sales at different price levels on the same scale.
Real-World Application
An appraiser has a lower-priced sale with two large offsetting adjustments and a higher-priced sale with one moderate adjustment. Converting gross dollars to percentages shows the higher-priced sale needed less relative change, and the reconciliation comment explains why it receives more weight.
More Reconciliation Questions
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