Property Valuation
In Iowa, the sales comparison approach requires the appraiser to make adjustments for differences between comparable sales and the subject property. A comparable with an extra full bathroom compared to the subject would require:
AA positive adjustment to the comparable
BA negative adjustment to the comparable✓ Correct
CNo adjustment, as bathrooms are irrelevant
DAn upward revision to the subject's value without adjusting the comparable
Explanation
When a comparable is superior to the subject (extra bathroom), the appraiser makes a negative (downward) adjustment to the comparable's sale price to bring it in line with what the subject would sell for. The mnemonic: if the comparable is better, adjust down.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
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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