When does market evidence support expressing a comparable adjustment as a percentage rather than a fixed dollar amount?
Correct Answer
B) When the supported effect is proportional to an identified price base
A percentage adjustment is appropriate when evidence supports an effect proportional to the expressly identified price base. A fixed dollar adjustment is appropriate when evidence supports that form. Neither time nor an amenity necessarily has one universal functional form. Comparable count, unverified price or size superiority alone does not choose the method.
Why This Is the Correct Answer
Option B is correct because a percentage adjustment fits when the supported effect varies in proportion to a clearly identified price base. When evidence shows a fixed amount, a dollar adjustment fits instead. The form of the adjustment should match the form the market evidence supports.
Why the Other Options Are Wrong
Option A: Whenever the comparable has more site or building area than the subject
Option A, whenever the comparable has more site or building area than the subject, is wrong because being superior in size does not decide the form of the adjustment. A size difference can be measured in dollars or percentages depending on the evidence.
Option C: Whenever more than three comparables are used
Option C, whenever more than three comparables are used, is wrong because the number of comparables has nothing to do with whether an effect is proportional. The adjustment form depends on market evidence, not on comparable count.
Option D: Whenever the actual sale price cannot be verified
Option D, whenever the actual sale price cannot be verified, is wrong because an unverified price is a data problem, not a reason to switch to percentages. A percentage applied to an unverified base would still rest on unreliable data.
Proportional means percent
If the effect grows with the price base, use a percent; if it stays fixed, use dollars.
How to use: Use this when deciding how to express an adjustment on the grid.
Exam Tip
Choose the answer that ties the adjustment form to market evidence; reject choices based on comparable count, size alone or data gaps.
Common Mistakes to Avoid
- -Choosing percentage adjustments based on comparable count
- -Assuming size differences require percentage adjustments
- -Using percentages to cover for an unverified price
Concept Deep Dive
Analysis
This question tests when a percentage adjustment, rather than a dollar adjustment, fits the market evidence. Adjustments can be expressed either way, and the choice should follow how the market reacts. A percentage is appropriate when evidence shows the effect is proportional to an identified price base.
Background Knowledge
Sales data adjustments may be made to the total price or a unit of comparison, and they may be expressed as a percentage or a dollar amount. Some effects, such as certain market-condition changes, may move in proportion to price, while others, such as a specific feature, may add a fairly fixed amount. The evidence decides which form is appropriate in each case.
Real-World Application
An appraiser finds that prices in a market have risen at a similar rate across price ranges over several months. Because the effect is proportional to price, the appraiser expresses the market-conditions adjustment as a percentage of each comparable's sale price. A pool adjustment in the same report is entered as a dollar amount because the evidence shows a fairly fixed contribution.
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 lakefront cottage comparable sold for $489,000. The sale included the seller's pontoon boat, with a verified market value of $22,000, and the living room furniture, with a verified market value of $6,000. The seller had paid $35,000 for the boat new three years ago. Both the comparable and the subject have a deeded boat slip. What is the comparable's sale price for the real property alone?
Next Question
Which adjustment technique does not require the strict similarity between sales that paired sales analysis does, if an adequate database is available?