Definition
The adjusted sales price in real estate appraisal is an estimated price of a comparable property after considering adjustments for differences between the comparable property and the subject property. The mapping of characteristics such as location, size, condition, and amenities and subsequent value adjustments help determine a more accurate price comparison. This adjusted figure provides a more reliable appraisal for the subject property by compensating for these variances.
Key Points:
- Purpose: To provide an accurate valuation of the subject property by comparing it to recently sold properties that are similar but not identical.
- Adjustments: Modifications made to account for differences in property features like size, location, condition, and amenities.
Examples
Example 1:
If the comparable property is almost identical to the subject property but has an additional half bath, the sales price might be adjusted. If the original sales price is $170,000, and the value assigned to the additional half bath is $6,000, the adjusted sales price would be $164,000.
Example 2:
Suppose a comparable property sold for $200,000, but it has a two-car garage while our subject property has only a single-car garage. If the value difference for the garage is estimated at $10,000, the adjustment subtraction results in an adjusted price of $190,000.
Frequently Asked Questions (FAQs)
What is the adjusted sales price used for?
The adjusted sales price helps appraisers and real estate professionals more accurately assess the value of a property by accounting for differences between comparable properties and the subject property.
How do appraisers determine the adjustments?
Appraisers use market analysis, expert knowledge, and possibly pricing models to determine the monetary value of features and amenities for adjustments.
Are adjustments always subtractions?
No, adjustments can be additions or subtractions. It depends on whether the comparable property is inferior or superior in a particular aspect compared to the subject property.
Is the adjusted sales price the final sale price?
No, the adjusted sales price is an estimated value used for appraisal purposes; the final sale price may vary based on market conditions, negotiations, and buyer/seller preferences.
Can the adjusted sales price change over time?
Yes, as market conditions fluctuate and comparable properties change, the adjusted sales price can also change.
Comparable Property
A property similar in size, condition, location, and features, used as a benchmark to assess the value of another property.
Sales Comparison Approach
A method where the value of a property is determined by comparing it to similar properties sold in the same area.
Appraisal
An expert assessment of the value of a piece of property, considering location, condition, and market trends.
Market Analysis
The process of studying market conditions to help determine the value of property and the appropriate price adjustments.
Online Resources
References
- Appraisal Institute, “The Appraisal of Real Estate,” 15th Edition.
- Real Estate Appraisal Standards, 2023.
- “The Dictionary of Real Estate Appraisal,” Appraisal Institute.
Suggested Books for Further Studies
- “The Appraisal of Real Estate” by the Appraisal Institute
- “Real Estate Appraisal: From Value to Worth” by David J. McDuff & Mark Shackleton
- “Mastering Real Estate Appraisal” by Dennis S. Tosh & Al W. Koosh
- “Practical Applications in Real Estate Appraisal” by William L. Ventolo & Martha R. Williams
Real Estate Basics: Adjusted Sales Price Fundamentals Quiz
### What is the purpose of adjusted sales price in real estate appraisal?
- [ ] To decrease property taxes
- [x] To provide an accurate valuation of a subject property
- [ ] To inflate property prices
- [ ] To set a standard market price for all properties
> **Explanation:** The purpose of the adjusted sales price is to provide an accurate valuation of a subject property by accounting for various differences between it and comparable properties.
### Do adjustments always decrease the sales price?
- [ ] Yes, always
- [x] No, they can be increases or decreases
- [ ] Rarely
- [ ] Mostly, but not always
> **Explanation:** Adjustments can either increase or decrease the sales price depending on whether the comparable property is superior or inferior in certain aspects compared to the subject property.
### If a comparable property has a feature the subject property lacks, what often happens to the sales price?
- [ ] It remains unchanged
- [x] It gets adjusted downward
- [ ] It becomes invalid
- [ ] It gets adjusted upward
> **Explanation:** The sales price of the comparable property is often adjusted downward to account for any additional features that the subject property lacks.
### Who is responsible for determining the value of adjustments in real estate appraisals?
- [ ] Real estate agents
- [x] Appraisers
- [ ] Sellers
- [ ] Buyers
> **Explanation:** Appraisers are responsible for determining the value of adjustments based on market analysis and their professional expertise.
### What primary factor drives the need for pricing adjustments?
- [ ] Seasonal trends
- [ ] Changes in neighborhood popularity
- [x] Differences in property characteristics
- [ ] Fluctuations in interest rates
> **Explanation:** Differences in property characteristics drive the need for adjustments to ensure the subject property's valuation is accurate.
### Can the adjusted sales price be used for tax assessments?
- [x] Yes, it can influence tax assessments
- [ ] No, it has no impact
- [ ] Only in certain states
- [ ] Only for commercial properties
> **Explanation:** The adjusted sales price can influence property tax assessments as it reflects a more accurate value of the property.
### What happens if a feature is significantly more valuable in a comparable property?
- [x] The comparable's price is adjusted downward
- [ ] The subject's market price is increased
- [ ] The property's valuation is cancelled
- [ ] The lender reassesses the mortgage amount
> **Explanation:** If a comparable property has a significantly more valuable feature, its price is adjusted downward to more closely align with the subject property.
### In what situations are adjustments not required?
- [ ] Always required
- [ ] For luxury properties
- [x] When properties are entirely identical
- [ ] For rental assessments
> **Explanation:** Adjustments are not required when properties are entirely identical in all relevant features and aspects.
### Which method closely relates to the concept of adjusted sales price?
- [ ] Cost Approach
- [ ] Income Capitalization Approach
- [x] Sales Comparison Approach
- [ ] Direct Assessment Approach
> **Explanation:** The Sales Comparison Approach directly relates to the concept of adjusted sales price, as it bases valuation on comparing similar properties.
### How often can the adjusted sales price fluctuate?
- [x] It can fluctuate based on market conditions
- [ ] It is fixed permanently
- [ ] It can only change with structural renovations
- [ ] Only once every 5 years
> **Explanation:** The adjusted sales price can fluctuate based on market conditions and changes in comparable property sales.
