National Real Estate Exam (PSI)Valuation and Market AnalysisMedium
An appraiser is valuing a property using the sales comparison approach. They have identified three comparable sales. Comparable A sold for $320,000 with a superior garage (worth $10,000) but an inferior kitchen (worth -$5,000). Comparable B sold for $310,000 with an inferior lot size (worth -$8,000) and an inferior patio (worth -$2,000). Comparable C sold for $330,000 with a superior view (worth $15,000) and a superior fireplace (worth $3,000). What is the adjusted sales price for Comparable B?
- A$300,000
- B$310,000
- C$330,000
- D$320,000
Show answer & explanationAnswer & explanation
Correct answer: D. $320,000
To adjust Comparable B: Start with its sales price of $310,000. It has an inferior lot size (worth -$8,000 relative to the subject, so add $8,000 to the comparable's price) and an inferior patio (worth -$2,000 relative to the subject, so add $2,000 to the comparable's price). Adjusted price = $310,000 + $8,000 + $2,000 = $320,000.
Why the other options are wrong
- A. This would be if you incorrectly subtracted the adjustments ($310,000 - $8,000 - $2,000).
- B. This is the unadjusted sales price of Comparable B.
- C. This is the unadjusted price of Comparable C, or a result of other calculation errors.
Sales Comparison 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. The goal is to make the comparables 'look' like the subject property.
- Adjustments are always made to the comparable property's price.
- If the comparable is superior to the subject in a feature, subtract the value of that feature from the comparable's price.
- If the comparable is inferior to the subject in a feature, add the value of that feature to the comparable's price.
Memory trick: Comparable's flaws add, its strengths subtract, to match the subject's tract.