When using paired sales analysis, an appraiser found that properties with fireplaces sold for an average of $8,000 more than similar properties without fireplaces. This $8,000 represents:
Correct Answer
A) A market-supported contributory-value indication for the feature
When relevant verified comparisons isolate an $8,000 price difference for the fireplace, that is a contributory-value indication. It is not a replacement-cost estimate and does not establish a universal contribution in other properties or markets.
Why This Is the Correct Answer
Option A is correct because paired sales analysis compares nearly identical properties to determine a single characteristic's effect on value. The $8,000 difference indicates how much the fireplace contributes to the whole property, which is a market-supported contributory-value indication.
Why the Other Options Are Wrong
Option B: Its replacement cost in the local market
Option B calls the $8,000 the fireplace's replacement cost in the local market. A difference in sale prices measures market contribution, which can differ from what it costs to build the feature.
Option C: Its assessed value under all tax systems
Option C calls it the fireplace's assessed value under all tax systems. Assessed values are set by tax authorities under their own rules and are not what a paired sales difference measures.
Option D: A standard amount for fireplaces that applies independent of the property
Option D treats $8,000 as a standard amount that applies independent of the property. Contributory value depends on the market and property type, so the figure does not transfer automatically to other properties or markets.
Contribution, not cost
A paired sales difference shows what buyers pay for a feature, which is its contribution, not its cost.
How to use: Use this when an option labels a paired sales difference as cost or assessed value.
Exam Tip
Paired sales measure the market's response; look for the answer that uses contribution language.
Common Mistakes to Avoid
- -Equating contributory value with replacement cost
- -Applying one market's feature value elsewhere without testing
- -Confusing market value with assessed value
Concept Deep Dive
Analysis
This question tests what a paired sales price difference represents. When comparisons isolate the effect of one feature, the price difference indicates what the market pays for that feature, its contributory value. It is not a cost figure or a universal amount.
Background Knowledge
The principle of contribution says a component's value is measured by how much it adds to the whole property by its presence or detracts by its absence. Paired sales analysis is one quantitative way to measure this. Results apply to the market and property type from which the pairs were drawn.
Real-World Application
An appraiser compares several similar ranch homes in one subdivision and finds those with fireplaces sold for about $8,000 more. That figure supports a fireplace adjustment for comparables in that market.
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A comparable sold for $300,000 with signed adjustments +$12,000, −$5,000, +$3,000 and −$2,000. What is its gross adjustment percentage, rounded to one decimal place?
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The subject property is a fourplex with annual gross income of $60,000. Its tenants pay their own utilities, and its operating expense ratio is 40%. An appraiser has researched three fourplex sales nearby. Sale 1 sold for $496,000, with gross income of $62,000 and a 41% expense ratio. Sale 2 sold for $524,800, with gross income of $64,000 and a 39% expense ratio. Sale 3 sold for $313,600, with gross income of $56,000 and a 62% expense ratio; its owner pays all utilities. The appraiser gives equal weight to the sales that are similar to the subject in expense structure. What value is indicated by the gross income multiplier?