Property Valuation
A comparable property sold for $250,000 but has a garage worth $10,000 that the subject property lacks. The adjusted value of the comparable for comparison to the subject is:
A$240,000✓ Correct
B$250,000
C$260,000
D$270,000
Explanation
When the comparable is superior to the subject (it has a garage the subject lacks), you subtract the adjustment from the comparable's sale price: $250,000 − $10,000 = $240,000.
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Key Terms to Know
Comparable Sales (Comps)
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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