Two recent sales are available to measure the value of a screened porch. Sale A, with a screened porch and a garden shed, sold for $356,000. Sale B, with neither, sold for $338,000. Both sold last month in the same subdivision and are alike in every other respect. Market data show sheds of this kind add about their depreciated cost, which for this shed is $4,000. The porch's depreciated replacement cost is $20,000. What porch adjustment does this pair indicate?
Correct Answer
A) $14,000
The two sales differ in two features, so the shed must be accounted for before the price difference can measure the porch. The $18,000 price difference less the shed's $4,000 cost-based contribution leaves $14,000 for the porch. $18,000 ignores the shed, $22,000 adds the shed instead of removing it, and $20,000 is the porch's cost rather than the market indication.
Why This Is the Correct Answer
Option A is correct because Sale A is superior to Sale B by both a porch and a shed. Removing the shed's $4,000 contribution from the $18,000 price difference leaves $14,000 attributable to the porch.
Why the Other Options Are Wrong
Option B: $18,000
Option B, $18,000, is the full price difference ($356,000 − $338,000). Part of that difference is the shed, which must be removed first: $18,000 − $4,000 = $14,000.
Option C: $20,000
Option C, $20,000, is the porch's depreciated replacement cost. The question asks what the pair indicates, and the market evidence after removing the shed is $14,000.
Option D: $22,000
Option D, $22,000, adds the shed's $4,000 to the $18,000 difference. Sale A has the shed, so its contribution is part of the gap and must be subtracted, giving $14,000.
Strip the extras, then measure
Before reading a pair's price gap as one feature, take out every other difference the superior sale has.
How to use: Use this whenever two paired sales differ in more than the feature being measured.
Exam Tip
Identify which sale has each extra feature; its contribution is subtracted from the gap, not added.
Common Mistakes to Avoid
- -Treating the full price gap as one feature when two differ
- -Adding a secondary feature's value instead of subtracting it
- -Substituting the feature's cost for the market indication
Concept Deep Dive
Analysis
The question combines two methods: a cost-based estimate removes a secondary difference (the shed) so that a paired sale can isolate the feature being measured (the porch). The candidate must remove the shed in the right direction and recognize the porch's cost as a distraction.
Background Knowledge
Paired sales analysis works best when two sales differ in one characteristic. When they differ in more than one, the appraiser must first adjust for the other differences, and a cost-based estimate is one accepted way to do so for a minor item.
Real-World Application
An appraiser finds only one good pair for a screened porch, and the better sale also has a small shed. The appraiser removes the shed with a depreciated-cost estimate confirmed by local agents and reports the remaining amount as the porch indication.
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
A protected greenbelt lies behind the house being appraised. A trainee proposes a $15,000 upward adjustment to two comparables that back onto other houses, taking the figure from a rule of thumb. Market data in the neighborhood do not isolate the greenbelt's effect through paired sales or any other measurement. What is the most appropriate treatment of this difference?
Next Question
A trainee analyzing a ranch-style home rates each comparable on view, condition, and location, scoring +1 for superior, 0 for similar, and −1 for inferior. A $380,000 sale scores +1 for view, −1 for condition, and +1 for location, a net of +1, so the trainee subtracts $5,000, a round figure chosen for each point. After doing the same for two other sales, the trainee averages the three results and reports $378,000. What is the main flaw in this analysis?