59. An owner has decided to sell a home. The home currently has a one-car garage. All the recent sales comps in the neighborhood have two-car garages. After checking with contractors, the owner finds that expanding the garage to accommodate a second car would cost $12,000. When performing a comparative market analysis for this property, a broker would make what kind of an adjustment?
Answer: B
A broker would subtract from the value of the owner's home.
In this scenario, the broker would adjust the value of the owner's home by subtracting the cost required to expand the garage, which is $12,000, due to the disparity between the owner's one-car garage and the two-car garages of the recent sales comps.
A) Add to the value of the owner's home.
This option is incorrect because adding value would imply that the one-car garage is equal to or more favorable than the two-car garages in the comps. Since the owner’s home is at a disadvantage due to the smaller garage, adding value does not reflect the market conditions.
B) Subtract from the value of owner's home.
This option is correct as it accurately reflects the need to adjust the home’s value downward. The cost of $12,000 to expand the garage represents an investment the owner must make to reach parity with comparable homes, thus justifying a subtraction from the current value.
C) Add to the sales price of recent sales comps.
This option is incorrect because the broker should not adjust the sales prices of the comps upward. The recent sales comps reflect the market value of homes with two-car garages, and there is no justification for increasing their value in relation to the owner's property.
D) Subtract from the sales price of recent sales comps.
This option is also incorrect. There is no need to adjust the sales prices of the recent comps downward as they already reflect the market value for homes with two-car garages, which is not in line with the owner’s one-car garage property.
Conclusion
The adjustment required is to subtract from the value of the owner's home, reflecting the necessary investment to upgrade the garage. This accurately represents the disparity between the owner's home and the comparable homes in the neighborhood. All other options fail to accurately address the market context and the implications of the garage size difference.