Florida Real Estate Broker ExaminationValuation and Market AnalysisMedium
A real estate agent is preparing a Comparative Market Analysis (CMA) for a seller. The subject property has a large, newly renovated kitchen. A comparable property, otherwise very similar, recently sold for $350,000 but has an outdated kitchen. Market data suggests a new kitchen adds $25,000 to a home's value. How should the agent adjust the comparable's sales price?
- AMake no adjustment, as the subject is superior.
- BAdd $25,000 to the comparable's price.
- CAdd $12,500 to the comparable's price.
- DSubtract $25,000 from the comparable's price.
Show answer & explanationAnswer & explanation
Correct answer: B. Add $25,000 to the comparable's price.
When a comparable property is inferior to the subject property, the appraiser (or agent in a CMA) must add the value of the superior feature that the subject possesses to the comparable's sales price. Since the subject has a new kitchen that the comparable lacks, the comparable is inferior by the value of that kitchen.
Why the other options are wrong
- A. An adjustment is necessary to make the comparable reflect the subject's features.
- C. This is an incorrect amount of adjustment.
- D. Subtracting would be incorrect; the comparable is inferior to the subject, so an adjustment must increase its price.
Sales Comparison Adjustment (Inferior Comparable)
When a comparable property possesses a feature inferior to that of the subject property, the appraiser must add the value of that feature to the comparable's sales price.
- Adjustments are made to the comparable property, not the subject.
- Inferior features on a comparable lead to an upward adjustment.
- Superior features on a comparable lead to a downward adjustment.
Memory trick: If the comparable is 'less', you 'add' to its worth.