Using paired sales analysis, Sale A sold for $280,000 with a two-car garage, and Sale B sold for $265,000 without a garage. All other features are similar. What is the indicated adjustment for a garage?
Correct Answer
A) $15,000
Paired sales analysis isolates the value of a single feature by comparing two similar sales that differ only in that feature. The garage adjustment is $280,000 - $265,000 = $15,000.
Why This Is the Correct Answer
Option A ($15,000) is correct because paired sales analysis involves a simple subtraction to isolate the value of the differing feature. Since Sale A (with garage) sold for $280,000 and Sale B (without garage) sold for $265,000, and all other features are similar, the garage's value contribution is $280,000 - $265,000 = $15,000. This represents the market's indication of what buyers are willing to pay for the addition of a two-car garage. The calculation is straightforward: higher sale price minus lower sale price equals the adjustment amount for the feature present in the higher-priced sale.
Why the Other Options Are Wrong
Option B: $7,500
$7,500 represents half of the actual difference between the two sales, which would be incorrect. This might result from dividing the price difference by two, but there's no mathematical or appraisal theory justification for this calculation in paired sales analysis.
Option C: $272,500
$272,500 appears to be an average of the two sale prices ($280,000 + $265,000 ÷ 2), but this doesn't represent the garage adjustment value. The average price has no relevance in determining the specific feature adjustment in paired sales analysis.
Option D: 5.7%
5.7% represents the percentage difference relative to the lower-priced sale ($15,000 ÷ $265,000), but the question asks for the indicated adjustment amount, not a percentage. While percentage adjustments can be useful, the standard practice is to express feature adjustments in dollar amounts for clarity and consistency.
PAIR = Price A minus Price B
Remember 'PAIR' - Price A (higher) minus Price B (lower) = Adjustment for the feature. Think of it as 'PAIRed sales = subtract the PAIR of prices' where you always subtract the lower price from the higher price to get the positive adjustment value.
How to use: When you see a paired sales question, immediately identify which sale has the feature and which doesn't, then subtract: (Price with feature) - (Price without feature) = Feature adjustment value.
Exam Tip
Always double-check that you're subtracting in the correct direction - the sale WITH the feature should have the higher price, and you subtract the price WITHOUT the feature from it to get a positive adjustment.
Common Mistakes to Avoid
- -Subtracting in the wrong direction (lower price minus higher price)
- -Calculating an average instead of a difference
- -Converting to percentage when dollar amount is requested
Concept Deep Dive
Analysis
Paired sales analysis is a fundamental appraisal technique used to isolate and quantify the value contribution of specific property features. This method requires finding two comparable sales that are nearly identical except for one distinguishing feature, allowing the appraiser to determine the market's perception of that feature's value. The analysis assumes all other variables are held constant, making the price difference directly attributable to the single varying feature. This technique is particularly valuable for determining adjustments in the sales comparison approach and for understanding how specific amenities or characteristics impact property values.
Background Knowledge
Paired sales analysis is one of the most reliable methods for determining adjustments in the sales comparison approach to value. It requires the appraiser to find sales that are truly comparable except for one feature, which can be challenging in practice but provides the most direct market evidence of a feature's value contribution.
Real-World Application
Appraisers frequently use paired sales analysis to develop adjustment grids for features like pools, fireplaces, upgraded kitchens, or additional bathrooms. The resulting adjustments are then applied to comparable sales when appraising a subject property that has or lacks these features.
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Previous Question
In paired sales analysis, Comparable Sale A sold for $285,000 with a two-car garage, while Comparable Sale B sold for $265,000 without a garage. Both properties are otherwise similar. What is the indicated adjustment for a garage?
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