Humber/Ontario Real Estate Course 3 Exam Practice

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According to the direct comparison approach, what percentage adjustment is required for a property sold 4 months ago at $187,500, if the monthly price increase was 0.8%?

  1. Minus adjustment of 3.2%

  2. Minus adjustment of 8.0%

  3. Plus adjustment of 3.2%

  4. Plus adjustment of 2.4%

  5. Plus adjustment of 4.8%

  6. Minus adjustment of 1.6%

The correct answer is: Plus adjustment of 3.2%

To determine the required percentage adjustment using the direct comparison approach, we need to consider the time that has passed since the property was sold and the monthly price increase rate. The property sold for $187,500 four months ago, and the value is expected to have increased over that time due to the monthly price increase of 0.8%. Calculating the total increase over four months involves multiplying the monthly increase by the number of months: 0.8% per month for 4 months equals a total increase of 3.2% (0.8% x 4 = 3.2%). Since the property was sold four months ago, the value of that property today is higher than the sale price due to this increase. Therefore, the current market value must be adjusted upward by this percentage to reflect what it would likely sell for today. Thus, a plus adjustment of 3.2% is necessary to account for this increase in property value over the four-month period. This adjustment ensures that the current appraisal is aligned with the market trends, reflecting the appreciation in property prices.

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