When an appraiser combines total-price and unit-of-comparison adjustments, which adjustments are made to the total sale price before conversion to a unit price?
Correct Answer
D) Property rights, market conditions, cash equivalence and non-realty items
Adjustments for property rights conveyed, market conditions, cash equivalence and non-real property items are made to the total sale price. The adjusted price is then converted to a unit of comparison and adjusted for location, use, and physical and economic characteristics.
Why This Is the Correct Answer
Option D is correct because property rights conveyed, market conditions, cash equivalence and non-real property items are adjusted on the total sale price. That adjusted total is then converted to a unit of comparison such as price per square foot or per acre. The remaining elements, location, use, and physical and economic characteristics, are adjusted at the unit level.
Why the Other Options Are Wrong
Option A: Location, use, and physical and economic characteristics of each sale
Option A lists location, use, and physical and economic characteristics, which are the elements adjusted after the price is converted to a unit of comparison, not before. It describes the second stage of the process rather than the total-price stage.
Option B: Physical characteristics and market conditions, before any other items
Option B pairs physical characteristics with market conditions. Market conditions belongs to the total-price stage, but physical characteristics are adjusted at the unit level after conversion, so the pairing is wrong.
Option C: Location and cash equivalence first, and then the property rights conveyed
Option C puts location with cash equivalence and then property rights. Location is a unit-level element adjusted after conversion, and the option leaves out market conditions and non-realty items, so it does not describe the total-price adjustments.
Deal first, then the dirt
Adjust the deal items (rights, market conditions, cash equivalence, non-realty) on the total price first, then convert and adjust the dirt items (location, use, physical and economic characteristics) per unit.
How to use: Use this when a question asks which adjustments come before conversion to a unit price.
Exam Tip
Look for the option that contains the transaction-related items together; any option mixing in location or physical characteristics belongs to the unit-level stage.
Common Mistakes to Avoid
- -Adjusting location before converting to a unit price
- -Treating physical characteristics as a total-price adjustment
- -Leaving non-realty items in the price before unit conversion
Concept Deep Dive
Analysis
This question tests the sequence used when an appraiser mixes total-price adjustments with unit-of-comparison adjustments. Some elements of comparison relate to the whole transaction, while others relate to the property itself. The transaction-level items (property rights, market conditions, cash equivalence and non-realty items) are applied to the total price first, and only then is the price converted to a unit price.
Background Knowledge
Elements of comparison include property rights conveyed, financing terms or cash equivalence, conditions of sale, market conditions, location, use, physical and economic characteristics, and non-realty components. Transaction-related elements affect the whole deal, so they are applied to the total price. Property-related elements are often easier to compare per unit once the price has been normalized.
Real-World Application
An appraiser comparing rural homesite sales first adjusts each total price for seller-paid financing and for market change since the sale. The adjusted totals are then divided by acreage, and the per-acre figures are adjusted for location and site utility.
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
The subject is a 1990s two-story home on the north side of Maple Run, a subdivision of similar homes that the MLS treats as one neighborhood. A school attendance boundary runs east to west through Maple Run. Over the past six months, three homes north of the boundary sold for $412,000 to $421,000, and three homes of similar size, age and condition south of it sold for $371,000 to $380,000. Four agents active in Maple Run and two recent buyers, interviewed separately, all say buyers here search by attendance zone and seldom consider homes on both sides. The county assessor values homes on both sides at the same rate per square foot. How should the appraiser define the market and select comparables?
Next Question
A comparable has only two signed adjustments, +$14,000 and −$9,000. What are the net and gross dollar adjustments?