Question 5

C: The subject property has a pool and the comp doesn't, so the appraiser adds $20,000 to the comp value.

This option illustrates the sales comparison approach, where adjustments are made to the comparable property’s value based on differences in features. In this case, the appraiser acknowledges the added value of the pool, which justifies increasing the comparable property's value by $20,000 to reflect its market worth accurately.

A) $15,000 in operating expenses is subtracted from the EGI of a building.

This option pertains to income analysis rather than the sales comparison approach. It discusses how operating expenses affect the Effective Gross Income (EGI), which is not relevant to comparing sales prices of properties.

B) The economic life of a building is 60 years, and the appraiser finds the building has a 20% depreciation rate.

While this option involves property valuation, it focuses on depreciation and economic life, which are components of the cost approach to valuation. It does not demonstrate the comparative sales method, which is about adjusting values based on comparable sales.

D) The uniform percentage of the area is 50%, so the market value is halved.

This option describes a uniform adjustment to market value based on area percentage, which lacks the comparative nature of the sales comparison approach. It does not involve specific property features or adjustments based on market data related to comparable sales.

Conclusion

The correct answer, C, effectively demonstrates the sales comparison approach by making an adjustment to the value of a comparable property based on the unique feature of the subject property. Other options fail to represent this method as they either focus on operating expenses, depreciation, or uniform adjustments that do not involve comparative analysis of property features. Thus, C is the only option that aligns with the principles of the sales comparison approach.