Humber/Ontario Real Estate Course 4 Exam Practice

In the direct comparison approach, if a comparable property has a garage valued at $30,000 and the subject property has a finished recreation room valued at $20,000, what is the total adjustment?

1. A minus adjustment of $50,000 to the comparable.

2. A minus adjustment of $10,000 to the comparable.

3. A plus adjustment of $10,000 to the comparable.

4. A plus adjustment of $10,000 to the subject property.

5. A minus adjustment of $20,000 to the subject property.

6. A minus adjustment of $40,000 to the subject property.

The correct answer is: A minus adjustment of $10,000 to the comparable.

In the direct comparison approach, adjustments are made to the comparable property to bring it in line with the subject property based on differences in features and their respective values. In this scenario, the comparable property has a garage valued at $30,000, while the subject property has a finished recreation room valued at $20,000. To determine the total adjustment needed, we need to calculate the value difference between the two properties concerning the features in question. The comparable property has a higher value feature (the garage) compared to that of the subject property (the recreation room). To adjust for this difference, we calculate the following: subtract the value of the subject property’s feature from the value of the comparable property’s feature. This means $30,000 (garage) minus $20,000 (recreation room) results in a $10,000 difference. Since the comparable property has a feature that is worth more than the subject property, you would apply a minus adjustment to the comparable property to reflect that it is worth more and thus needs to be reduced in appraisal to align with the subject property's value. By making a minus adjustment of $10,000 to the comparable, the appraiser acknowledges that the subject property is at a disadvantage due to the