An appraiser is valuing a single-family home using the sales comparison approach. Which of the following factors would likely require the MOST significant dollar adjustment to a comparable property's sales price?
- AThe comparable property having an additional full bathroom.
- BA discrepancy of 5 years in age between the properties.
- CA difference of 50 square feet in living area.
- DThe comparable property being located in a different school district.
Show answer & explanationAnswer & explanation
Correct answer: D. The comparable property being located in a different school district.
Location, particularly school district, is often one of the most significant value drivers for residential properties. A difference in school districts can lead to substantial variations in property values, often much higher than differences in minor square footage, age, or even an additional bathroom. Buyers prioritize good school districts, and this preference directly translates into higher property values.
Why the other options are wrong
- A. An additional bathroom is a significant feature but often less impactful than a major location difference.
- B. Age differences can be adjusted, but 5 years is often less impactful than location.
- C. While an adjustment, 50 sq ft is relatively minor compared to other factors.
Sales Comparison Approach - Major Adjustments
In the sales comparison approach, adjustments are made for differences between the subject and comparable properties. Location (e.g., school district, neighborhood quality) often requires the largest dollar adjustments due to its profound impact on property value.
- Location is a primary driver of residential property value.
- School districts significantly influence buyer demand and prices.
- Major adjustments reflect substantial differences in value drivers.
- Adjustments are always applied to the comparable property's sales price.
Memory trick: Location's leverage leads to larger adjustments.