Question

The subject property is located in a neighborhood that is deemed to be inferior to the comparable. What type of adjustment is necessary in the sales comparison approach?

Answer 1

In the sales comparison approach, a negative adjustment is necessary to account for the inferior neighborhood of the subject property compared to the comparable.

Step-by-step explanation:

In the sales comparison approach, adjustments are made to the comparable properties to account for any differences between them and the subject property. In this case, since the neighborhood of the subject property is considered inferior to the comparable, a negative adjustment would be necessary to reflect the difference in value.

For example, if the comparable property sold for $200,000 and a negative adjustment of 10% is applied, the adjusted value would be $180,000. This adjustment accounts for the inferior neighborhood and brings the value of the comparable closer to that of the subject property.

By making adjustments, the sales comparison approach enables appraisers to determine the fair market value of the subject property based on recent sales of comparable properties.