California Real Estate SalespersonProperty Valuation and Financial AnalysisEasy
An appraiser is valuing a single-family home using the sales comparison approach. The subject property has a two-car garage, while Comparable A, which sold for $450,000, has only a one-car garage. Market data indicates that a two-car garage adds $20,000 to a property's value compared to a one-car garage. What adjustment should be made to Comparable A?
- ASubtract $20,000 from Comparable A's sales price.
- BNo adjustment is necessary as garages are not typically adjusted.
- CAdd $10,000 to Comparable A's sales price.
- DAdd $20,000 to Comparable A's sales price.
Show answer & explanationAnswer & explanation
Correct answer: D. Add $20,000 to Comparable A's sales price.
In the sales comparison approach, adjustments are made to comparable properties to make them more similar to the subject property. Since the subject property has a superior feature (two-car garage) compared to the comparable (one-car garage), the value of that superior feature must be added to the comparable's sales price.
Why the other options are wrong
- A. This would be incorrect. Subtracting would imply the subject was inferior to the comparable.
- B. This is incorrect. Garages, like other features, are adjusted based on market value.
- C. This is incorrect. The full market value difference for the feature should be applied.
Sales Comparison Approach - Adjustments
In the sales comparison approach, adjustments are made to the sales prices of comparable properties to account for differences between them and the subject property, making them more directly comparable.
- Adjustments are always made to the comparable property, never the subject.
- If the comparable is inferior to the subject in a feature, add value to the comparable's price.
- If the comparable is superior to the subject in a feature, subtract value from the comparable's price.
Memory trick: Always Adjust the Comparable, Not the Subject!