A real estate agent is preparing a Comparative Market Analysis (CMA) for a seller. They have identified three comparable properties that recently sold. Which of the following factors is MOST likely to require an upward adjustment to the comparable property's sales price when comparing it to the subject property?
- AThe comparable property recently had a full kitchen renovation, while the subject property's kitchen is original.
- BThe comparable property sold last month, while the subject property is being evaluated today.
- CThe comparable property has a larger lot size than the subject property.
- DThe comparable property has one less bathroom than the subject property.
Show answer & explanationAnswer & explanation
Correct answer: D. The comparable property has one less bathroom than the subject property.
When performing a CMA, adjustments are made to the comparable properties, not the subject property. An upward adjustment to a comparable's price is made when the comparable is inferior to the subject property in a specific feature. Having one less bathroom makes the comparable property inferior to the subject, thus requiring an upward adjustment to the comparable's price to reflect the subject's superior feature.
Why the other options are wrong
- A. A full kitchen renovation makes the comparable superior, requiring a downward adjustment.
- B. Time adjustments are made if market conditions have changed significantly, but this doesn't automatically imply an upward adjustment without more information on market trends, and it's a different type of adjustment than feature differences.
- C. A larger lot size makes the comparable superior, requiring a downward adjustment.
CMA Adjustments
In a Comparative Market Analysis (CMA), adjustments are made to comparable properties' sales prices to account for differences between the comparables and the subject property. The goal is to estimate the subject property's value.
- Adjustments are always made to the comparable property, never the subject.
- If the comparable is superior to the subject, its price is adjusted DOWN.
- If the comparable is inferior to the subject, its price is adjusted UP.
Memory trick: Comparable's shortcomings lift its value to match the subject's worth.