In the sales comparison approach to valuation, when making adjustments for differences between the subject property and comparable sales, which property is adjusted?
Correct Answer
C) The comparable sales are adjusted to match the subject property
In the sales comparison approach, adjustments are always made to the comparable sales (comps), never to the subject property. If a comparable is superior to the subject in some feature, a negative adjustment is made to the comp's price; if the comparable is inferior, a positive adjustment is made. The goal is to make each comparable reflect what it would have sold for if it were identical to the subject property.
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Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
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