California Real Estate SalespersonProperty Valuation and Financial AnalysisHard
A comparable property sold six months ago for $280,000. Market research shows that property values in the area have been appreciating at a steady rate of 0.5% per month since that sale. What adjusted sale price should the appraiser use for this comparable to reflect current market conditions?
- A$294,000
- B$284,000
- C$291,200
- D$288,400
Show answer & explanationAnswer & explanation
Correct answer: D. $288,400
Total market appreciation over 6 months = 0.5% × 6 = 3%. Adjustment amount = $280,000 × 0.03 = $8,400. Adjusted value = $280,000 + $8,400 = $288,400.
Why the other options are wrong
- A. This overstates the adjustment beyond the correct 3% calculation.
- B. This understates the adjustment; it does not reflect the full 3% increase.
- C. This uses an incorrect appreciation rate not supported by the given data.
Market Conditions (Time) Adjustment
An adjustment made to a comparable sale price to account for changes in market value between the date of sale and the effective date of appraisal.
- Adjustment = Sale price × (monthly rate × number of months)
- Applied when comparable sold before the appraisal date in a changing market
- Reflects appreciation or depreciation trends in the market
Memory trick: Old sale price grows with the market's monthly climb.