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
B) $15,000
Why this is correct: Paired sales analysis compares two similar sales differing only in one feature. Sale A ($280,000) has a garage; Sale B ($265,000) does not. The price difference of $15,000 is attributed to the garage. Why the other choices are wrong: "$272,500" is the average of the two sale prices, not the adjustment. "5.7%" is the percentage difference relative to Sale B, but the question asks for the adjustment (dollar amount). "$7,500" is half the observed difference, with no basis. Exam tip: In paired sales, the adjustment is the simple dollar difference between the two sale prices.
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
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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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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