Humber/Ontario Real Estate Course 4 Exam Practice

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When using the direct comparison approach to estimate a property's market value, how should an adjustment be made when a comparable has a swimming pool, but the subject property does not?

  1. The adjustment should be based on the current value of the swimming pool.

  2. The adjustment should be based on the cost of constructing the swimming pool.

  3. No adjustment should be made.

  4. The adjustment should be based on the difference between the cost and current value of the swimming pool.

  5. The adjustment should be based solely on market conditions.

  6. The adjustment should be based on similar properties without a swimming pool.

The correct answer is: The adjustment should be based on the current value of the swimming pool.

When using the direct comparison approach, the goal is to determine a property's market value by comparing it with similar properties that have sold recently. In this process, adjustments must be made for differences between the subject property and the comparable properties to arrive at a more accurate estimate. In this scenario, where the comparable property has a swimming pool and the subject property does not, the correct approach is to adjust for that feature based on its current market value. This means determining how much the absence of a swimming pool may affect the price of the subject property compared to a similar property that has a pool. By adjusting based on the current value of the swimming pool, you are reflecting how buyers perceive the difference in value between properties with and without this feature. This method aligns with the principle that buyers and sellers make decisions in the real estate market, which emphasizes the need for current market values rather than construction costs, cost differences, or other less relevant adjustments that might not accurately reflect buyer preferences in the current market conditions. Thus, adjusting for the current value of the swimming pool provides a realistic assessment of the subject property's market value in relation to the comparable property.

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