Market data show home prices in a neighborhood have been increasing by 0.5% per month. A comparable went under contract 6 months before the effective date of the appraisal and closed for $360,000. Ignoring all other differences, what is the comparable’s time-adjusted indication as of the appraisal date?
Correct Answer
A) $370,800
Step 1: Monthly market change = 0.5%. Step 2: Total time adjustment for 6 months = 0.5% × 6 = 3.0%. Step 3: Dollar adjustment = $360,000 × 3% = $10,800. Step 4: Because the market increased after the comparable went under contract, add the increase to the older comparable sale. Step 5: Time-adjusted indication = $360,000 + $10,800 = $370,800.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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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Previous Question
Comparable Sale 2 closed at $390,000 with the seller paying $10,000 of the buyer’s closing costs. Market analysis indicates that this concession inflated the comparable’s effective price by only $6,000. How should the appraiser adjust the comparable for concessions?
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A subject property sold in an arm’s-length transaction 10 months ago. How may that prior sale generally be handled in the sales comparison approach?