Final answer:
Adjustments for the sales comparison approach in real estate valuation should start with the financing terms and cash equivalency. This is done before adjusting for market conditions, conditions of the sale,
Step-by-step explanation:
The question relates to the order in which adjustments are made for the sales comparison approach (also known as the market approach) in real estate valuation.
When attempting to determine the value of a property using the sales comparison approach, it is essential to consider various elements that can affect the property's value. To correctly adjust a property's price, these elements must be applied in a specific sequence.
In the sales comparison approach, the first element to be applied is commonly the financing terms and cash equivalency. This is because the terms under which financing is obtained can significantly affect the sale price.
A seller might accept a lower sale price for cash offers or for financing that is favorable to them. Therefore, before making adjustments for other factors, it is essential to adjust the price to a cash-equivalent basis to ensure that a comparison is made on a like-for-like basis.
Following that adjustment, one would then account for market conditions, conditions of the sale, and physical characteristics in subsequent order. Each element is adjusted to make the comparables as similar as possible to the subject property, providing the most accurate valuation.