Humber/Ontario Real Estate Course 4 Exam Practice

Appraiser Green is using the direct comparison approach. If a comparable property sold for $323,600 four months ago with an average price increase of 0.6% per month, what is the required adjustment?

1. Plus adjustment of 0.16%

2. Plus adjustment of 2.4%

3. Minus adjustment of 3.2%

4. Minus adjustment of 4.8%

5. Plus adjustment of 3.8%

6. Minus adjustment of 1.8%

The correct answer is: Plus adjustment of 2.4%

To determine the required adjustment using the direct comparison approach, we first need to calculate the total increase in the comparable property's value over the four months since it sold. The property was sold for $323,600, and with an average price increase of 0.6% per month, we can calculate the total increase over four months. The calculation for the total percentage increase is done by multiplying the monthly increase (0.6%) by the number of months (4): 0.6% × 4 = 2.4% Next, we convert this percentage into a dollar amount to apply the adjustment. To find the dollar amount of the increase, we take 2.4% of the original sale price of $323,600. Calculating 2.4% of $323,600 involves the following steps: - Convert the percentage to a decimal: 2.4% = 0.024 - Multiply this by the sale price: 0.024 × $323,600 = $7,782.40 This value indicates the current equivalent value adjustment needed due to appreciation in the market. Since the original price was $323,600 and the necessary adjustment shows an increase based on market conditions, this is