Humber/Ontario Real Estate Course 4 Exam Practice

If a comparable property sold for $187,500 four months ago and similar properties have been appreciating by 0.8% per month, what is the required time adjustment for the property based on the direct comparison approach?

1. A positive adjustment of 4.8%

2. A positive adjustment of 3.2%

3. A negative adjustment of 8.0%

4. A negative adjustment of 3.2%

5. A positive adjustment of 6.4%

6. A negative adjustment of 1.6%

The correct answer is: A positive adjustment of 3.2%

To determine the required time adjustment for the property based on the direct comparison approach, it's essential to calculate how much the value of comparable properties has appreciated over the four months since the sale of the comparable property. A 0.8% appreciation per month over four months can be calculated by multiplying the monthly rate by the number of months: 0.8% × 4 months = 3.2% This percentage represents the increase in value that similar properties have experienced over that time frame. Since the comparable property sold for $187,500 four months ago, its current value, accounting for the appreciation, can be thought of as needing to be adjusted upward by this 3.2% to reflect the current market conditions. In direct comparison, if you're comparing a property to one that sold four months ago, and that property has appreciated, the standard practice is to make a positive adjustment to the sale price of the comparable property. This positive adjustment compensates for the lag in time that has resulted in a higher market value for similar properties. Thus, a positive adjustment of 3.2% accounts for this increase in market value, which aligns with the understanding of how time impacts property value in real estate evaluations. Hence, this makes the reasoning