Property Valuation
When a comparable sale sold for more than the subject property, the appraiser makes a:
APositive adjustment to the comparable
BNegative adjustment to the comparable✓ Correct
CPositive adjustment to the subject
DNo adjustment is needed
Explanation
If a comparable sold for more than the subject (because it had a superior feature), the appraiser makes a downward (negative) adjustment to the comparable's sale price to make it equivalent to the subject.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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