1. A ranch house with a double garage is being valued. The house next door, which is similar except that it lacks a garage and has an outside deck, was sold last month for $138,000. Experience in that area shows that a two car garage is probably worth $10,000 to buyers, while in general, they will pay only $500 extra for a deck. The ranch house is most likely to sell for around
Answer: C
The ranch house is most likely to sell for around $147,500.
To determine the value of the ranch house with a double garage, we start with the sale price of the similar house next door, which is $138,000. The double garage adds an estimated value of $10,000, while the absence of the deck, which adds only $500, means we need to add the garage value to the price of the neighboring house.
A) $123,600
This option is incorrect as it indicates a value significantly lower than the neighboring house's sale price. Subtracting any value for the garage or the deck does not align with the provided estimates, making this option unrealistic.
B) $128,500
This option also falls short of reflecting the true value of the ranch house. It seems to underestimate the added value of the double garage, which is assessed at $10,000, leading to an inaccurate calculation when compared to the neighbor's recent sale.
C) $147,500
This is the correct answer. By starting with the neighboring house's sale price of $138,000 and adding the value of the double garage ($10,000), we arrive at a total value of $148,000. However, subtracting the $500 value for the deck adjustment gives us a final valuation of $147,500, accurately reflecting the market's valuation.
D) $148,500
This option is incorrect because it mistakenly assumes that the deck’s value should be added instead of being deducted. The proper valuation should account for the garage addition and not add the deck's value, leading to an inflated estimate.
Conclusion
The ranch house's estimated selling price of $147,500 accurately reflects the market adjustments based on the neighboring house's sale and the value of the garage. Options A and B undervalue the property, while D incorrectly adds the deck's value rather than subtracting it. Thus, option C stands as the most accurate and supported valuation.