Texas Real Estate Sales Agent ExamValuation and Market AnalysisEasy
A real estate agent is preparing a Comparative Market Analysis (CMA) for a seller client. The agent has identified three comparable properties that recently sold. One comparable property has a new swimming pool, which is estimated to add $25,000 to its value. The subject property does not have a pool. When adjusting the comparable property, what action should the agent take?
- AAdd $25,000 to the comparable property's sales price.
- BAdd $25,000 to the subject property's estimated value.
- CSubtract $25,000 from the comparable property's sales price.
- DIgnore the pool as it is an amenity, not a structural component.
Show answer & explanationAnswer & explanation
Correct answer: C. Subtract $25,000 from the comparable property's sales price.
In a CMA, adjustments are always made to the comparable properties, not the subject property. If a comparable has a feature the subject lacks, the value of that feature is subtracted from the comparable's sales price to make it more like the subject. Therefore, the value of the pool should be subtracted from the comparable.
Why the other options are wrong
- A. Adding to the comparable would imply the subject has a feature the comparable lacks, which is incorrect in this scenario.
- B. Adjustments are made to the comparable properties, not the subject property, in a CMA.
- D. A swimming pool is a significant amenity that affects property value and must be considered in a CMA.
CMA Adjustment Principle
When performing a Comparative Market Analysis, adjustments for differences between the subject property and comparable properties are always made to the comparable properties' sales prices, never to the subject property.
- Adjustments are made to comparables.
- If comparable is superior, subtract value from comparable.
- If comparable is inferior, add value to comparable.
Memory trick: Comparables 'C'ome 'M'atch 'A'll the subject's 'S'tuff, so adjust 'S'ales prices accordingly.