Mastering Adjustments in Real Estate Comparables

When it comes to nailing your Humber/Ontario Real Estate Course 2 Exam, mastering property adjustments is key. Let’s break down a real-world scenario that feels like it could pop up on your exam, combining numbers and concepts into a practical exercise.

Imagine Salesperson Jones—he’s just come across a comparable property that sold for $310,000. Nice number, right? Now, we’ve got to sharpen our pencils and roll up our sleeves to see why that price might not fit snugly into our buying or selling strategies. The comparable property features an extra half bath valued at $2,000, a finished basement worth $20,000, and upgraded appliances bringing in another $5,000. Quite the list of amenities!

But hold up—before you get too excited over that flashy price, let’s chat about the subject property. This particular gem boasts a sunroom valued at $10,000 and a larger lot that adds another $15,000 to the mix. So, here’s the question: how do we make sense of all these bells and whistles when it comes to adjustments?

Instead of just throwing numbers around, we need to think carefully about the features in both properties. Salesperson Jones will add up the perks found in the subject property and subtract the perks that the comparable property has. When we tally it all up, we get:

• Features in the comparable property:
• Extra half bath: $2,000 (subtract)
• Finished basement: $20,000 (subtract)
• Upgraded appliances: $5,000 (subtract)

That’s a grand total of $27,000 in adjustments needed from the comparable property. Now, let’s look at the subject property’s advantages:

• Sunroom: $10,000 (add)
• Larger lot: $15,000 (add)

Totaling these positives gives us $25,000. So, when Salesperson Jones crunches the numbers, here’s what to do:

1. Start with the $310,000 value of the comparable property.
2. Subtract the $27,000 (features that the comparable has).
3. Add back in the $25,000 (features missing in the comparable).

Finally, it’ll look something like this:

• $310,000 - $27,000 + $25,000 = $308,000

However, it's critical to recognize the adjustments balance each other out. After entire calculations, that net adjustment is actually a decrease of $2,000 against the comparable property. So you end up finding that despite all the shiny features it has going for it, the comparable property needs an adjustment downward by $2,000 to reflect a fair valuation in relation to the subject property.

Now, you might be wondering why all this matters. Understanding how to evaluate and adjust comparable properties isn’t just academic—it’s practical! It empowers you in real-world scenarios. Imagine standing in front of a client, confidently explaining how you arrived at a property’s appraised value. That’s the kind of expertise that builds trust and boosts your career!

So, as you gear up for your exam, let this scenario sink in. Practicing these calculations can be your golden ticket. A little practice goes a long way, and who knows? With clarity and confidence, you might just breeze through that tricky part on the exam!