A ranch house with a double garage is being valued. The house next door, which is similar except that it lacks a garage and has an outside deck, was…

This valuation uses the Sales Comparison Approach. The process begins with the sale price of the comparable property ($138,000) and adjusts it for differences with the subject property. The subject property is superior because it has a two-car garage, which the comparable lacks; therefore, the value of the garage ($10,000) is added. The comparable property is superior because it has a deck, which the subject property lacks; therefore, the value of the deck ($500) is subtracted.

The calculation is: $138,000 (Comparable Price) + $10,000 (Garage) - $500 (Deck) = $147,500.

A. $123,500: This result comes from an arbitrary and incorrect calculation, likely subtracting values that should have been added or using incorrect adjustment logic.

B. $128,500: This result incorrectly reverses the adjustments by subtracting the value of the garage and adding the value of the deck ($138,000 - $10,000 + $500).

D. $148,500: This result incorrectly adds the value of the deck instead of subtracting it ($138,000 + $10,000 + $500), failing to account for the comparable's superior feature.

1. The Appraisal Institute. (2013). The Appraisal of Real Estate (14th ed.). This foundational text, widely used in university real estate programs, details the adjustment process. In Chapter 18, "Sales Comparison Approach: Analysis and Adjustments," it establishes the principle that if a comparable property is inferior to the subject property on a feature, an upward adjustment is made to the comparable's price, and if it is superior, a downward adjustment is made.

2. Ling, D. C., & Archer, W. R. (2018). Real Estate Principles: A Value Approach (6th ed.). McGraw-Hill Education. Chapter 7, "Valuation Using the Sales Comparison and Cost Approaches," explains that adjustments are made to the sale prices of comparable properties to make them equivalent to the subject property. The value of a feature present in the subject but not the comparable is added to the comparable's price.

3. University of Florida, Warrington College of Business. (n.d.). REE 3043 - Real Estate Analysis Courseware. The principles taught in this and similar university courses align with the methodology of adjusting comparable sales. The core concept is to adjust the comparable property's price to reflect the subject property's characteristics, adding for features the subject has and subtracting for features the comparable has.