New York Real Estate Salesperson ExaminationValuation and Market AnalysisMedium
An appraiser is using the sales comparison approach to value a single-family home. The subject property has a two-car garage, while a comparable property, which recently sold for $350,000, only has a one-car garage. The appraiser estimates the difference in value for a second garage space is $15,000. What adjustment should be made to the comparable property's sales price?
- AMake no adjustment, as garage size is a minor factor.
- BAdd $15,000 to the comparable's price.
- CSubtract $15,000 from the comparable's price.
- DAdd $15,000 to the subject property's value.
Show answer & explanationAnswer & explanation
Correct answer: B. Add $15,000 to the comparable's price.
In the sales comparison approach, adjustments are always made to the comparable property. If the comparable is inferior to the subject (e.g., has a one-car garage compared to the subject's two-car garage), its price must be increased to make it equivalent to the subject. Therefore, $15,000 should be added to the comparable's price.
Why the other options are wrong
- A. Garage size can be a significant factor influencing property value and requires adjustment.
- C. Subtracting would incorrectly make the comparable appear even less valuable.
- D. Adjustments are never made to the subject property in an appraisal.
Sales Comparison Approach (Adjustments)
An appraisal method that estimates value by comparing the subject property to similar recently sold properties (comparables) and making adjustments for differences.
- Adjustments are always made to the comparable properties.
- If comparable is inferior to subject, add value to comparable.
- If comparable is superior to subject, subtract value from comparable.
Memory trick: If Comp is Worse, Add Cash; If Comp is Better, Subtract Treasure.