Florida Real Estate Sales Associate Examination Content OutlineReal Estate Property and OwnershipHard
A buyer is considering two comparable homes in the same neighborhood. Home A recently sold for $450,000 and has a brand-new roof (estimated value $20,000) and an updated kitchen (estimated value $30,000). Home B, the subject property, has an older roof and a dated kitchen. Using the sales comparison approach, what would be the adjusted sales price of Home A when comparing it to Home B?
- A$420,000
- B$500,000
- C$480,000
- D$400,000
Show answer & explanationAnswer & explanation
Correct answer: D. $400,000
When using the sales comparison approach, if the comparable property (Home A) is superior to the subject property (Home B), the value of its superior features must be subtracted from the comparable's sales price. Home A has a better roof ($20,000) and kitchen ($30,000), so these values are subtracted: $450,000 - $20,000 (roof) - $30,000 (kitchen) = $400,000.
Why the other options are wrong
- A. Incorrect. This would be $450,000 - $30,000 (kitchen) or $450,000 - $20,000 (roof) - $10,000 (another adjustment).
- B. Incorrect. This would involve adding the full value of both improvements, which is the opposite of the correct adjustment when the comparable is superior.
- C. Incorrect. This would involve adding, not subtracting, the value of improvements.
Sales Comparison Approach Adjustments
In the sales comparison approach, adjustments are made to the comparable properties (never the subject) to account for differences in features. If the comparable is superior, subtract; if inferior, add.
- Always adjust the comparable property, not the subject.
- C-S-A: If Comparable is Superior, Subtract.
- C-I-A: If Comparable is Inferior, Add.
Memory trick: COMPARE and ADJUST: Superior Subtract, Inferior Add.