A real estate agent is preparing a CMA for a 2,000 square foot bungalow. A comparable property sold for $450,000 but has an additional 300 square feet. If the adjustment is $150 per square foot, what is the adjusted sale price of the comparable?

Q: What is the correct answer to: A real estate agent is preparing a CMA for a 2,000 square foot bungalow. A comparable property sold for $450,000 but has an additional 300 square feet. If the adjustment is $150 per square foot, what is the adjusted sale price of the comparable?

The correct answer is $405,000. Option A ($405,000) is correct because we must adjust the comparable downward since it has more square footage than the subject property. The calculation is: $450,000 - (300 sq ft × $150/sq ft) = $450,000 - $45,000 = $405,000. This follows the fundamental CMA principle that adjustments are made TO the comparable to reflect what it would have sold for if it were similar to the subject property. Since the comparable is larger, buyers would pay less for the smaller subject property, requiring a downward adjustment.

Q: What background knowledge is needed for this Property Valuation question?

Comparative Market Analysis (CMA) is a valuation method used to estimate property value by comparing similar recently sold properties. Under provincial real estate legislation, agents must provide accurate market valuations when advising clients. The adjustment process involves identifying differences between the subject property and comparables, then mathematically adjusting the comparable's sale price to reflect these differences. Adjustments are always made TO the comparable property, not the subject. If a comparable has superior features (like more square footage), its price is adjusted downward to reflect what it would have sold for without those superior features. This ensures accurate property valuation and protects both buyers and sellers from mispricing.

Q: What is a good way to remember the answer to this Property Valuation question?

Remember: 'If the comparable is BIGGER, you SUBTRACT.' When the comparable property has more of something desirable (square footage, bedrooms, etc.), you must subtract value from its sale price. Think of it as 'taking away the extra value' to make it equal to your smaller subject property. When you see CMA adjustment questions, immediately identify which property is larger or has more features. If the comparable has more, subtract the adjustment. If the subject has more, add to the comparable. Always ask: 'What would the comparable have sold for if it were identical to my subject property?'

Q: What exam tip applies to this Property Valuation question?

Quickly identify the direction of adjustment: comparable larger than subject = subtract adjustment from comparable's price. Set up the calculation as: Sale Price - (Difference × Rate per unit). Double-check by asking if your answer makes logical sense given the size difference.

Q: How does this Property Valuation concept apply in real world practice?

A real estate agent is preparing a CMA for a client's 1,800 sq ft home. They find a comparable that sold for $520,000 but it's 2,100 sq ft. Using a $140/sq ft adjustment, they calculate: $520,000 - (300 sq ft × $140) = $520,000 - $42,000 = $478,000. This adjusted price better reflects what buyers would pay for the client's smaller home, helping set an appropriate listing price and managing client expectations about market value.

Question

Property ValuationMarket AnalysisMEDIUM

A real estate agent is preparing a CMA for a 2,000 square foot bungalow. A comparable property sold for $450,000 but has an additional 300 square feet. If the adjustment is $150 per square foot, what is the adjusted sale price of the comparable?

Answer Options

A

$405,000

B

$450,000

C

$495,000

D

$525,000