Property Valuation
In the sales comparison approach, a Montana appraiser finds that the subject property lacks a garage that all comparable sales have. If comparable garages contribute $15,000 to value, the appraiser should make:
AA $15,000 downward adjustment to the subject property's value
BA $15,000 upward adjustment to the subject property's value
CA $15,000 downward adjustment to each comparable sale✓ Correct
DNo adjustment since the subject lacks the feature
Explanation
When a comparable has a feature (garage) that the subject lacks, the appraiser makes a downward (negative) adjustment to the comparable's sale price to bring it down to the subject's level. This reflects that the comp is superior in this feature.
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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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