Humber/Ontario Real Estate Course 4 Exam Practice

When making an adjustment under the direct comparison approach for a property with a deck, what is the correct basis for the adjustment?

1. The salesperson would make an adjustment based on the deck’s current value of $18,500, not its cost

2. The appraiser would add the upgrade cost to the original cost

3. The adjustment would be based on the upgrade cost predictions

4. The value must be calculated from the installation year value

5. The cost of materials used is the primary measure for adjustment

6. The depreciation of the deck value from the original cost should be applied

The correct answer is: The salesperson would make an adjustment based on the deck’s current value of $18,500, not its cost

When making an adjustment under the direct comparison approach for a property with a deck, the correct basis is the deck's current value, which in this case is stated as $18,500. This method focuses on the value that the feature, such as a deck, contributes to the property rather than the cost it incurred to install or create it. Utilizing the current market value ensures that the adjustment reflects what buyers are willing to pay for similar properties with and without the feature in question. This approach is vital because it acknowledges market perceptions rather than just the historical costs, which may not accurately represent the present-day value of improvements. Other options, while potentially relevant in different contexts, do not adequately reflect the principle of market value. For instance, adjustment based on upgrade costs or depreciation could misalign with the current market dynamics, potentially leading to less accurate property valuations. Focusing on installation values or the cost of materials may not capture the real-time economic conditions influencing property pricing. Thus, basing the adjustment on the deck's current value ensures the analysis aligns with the principles of the direct comparison method, making it the correct choice.