Humber/Ontario Real Estate Course 3 Exam Practice

When making an adjustment under the direct comparison approach, how should a salesperson account for a comparable property's deck?

1. The salesperson would make an adjustment based on the deck's current value of $18,500, not its cost.

2. The salesperson would make an adjustment based on the original cost of $23,700, not the current value.

3. The salesperson would make an adjustment based on the original cost of $23,700 less the current value of $18,500.

4. The upgrade cost would be added to the current value when making an adjustment.

5. The salesperson should ignore the deck in the adjustment.

6. The salesperson should use an average of the deck's costs for adjustment.

The correct answer is: The salesperson would make an adjustment based on the deck's current value of $18,500, not its cost.

The reasoning behind using the current value of the deck for adjustments in the direct comparison approach is based on the principle of reflecting the present market conditions and value rather than historical costs. Real estate professionals aim to provide the most accurate and relevant information that reflects current buyer sentiments and market trends. By focusing on the deck's current value of $18,500, the salesperson ensures that the adjustment is relevant to the appraisal process. This value represents what a potential buyer or market participant would acknowledge and consider when assessing the overall worth of a property. Adjusting based on current value allows for a more accurate comparison with other similar properties in the market, which may have different amenities or modifications. In contrast, using original costs, which may no longer reflect the modern condition or desirability of the feature, could lead to misrepresenting the property's worth. The historical cost might not encapsulate depreciation, changes in market preferences, or upgrades that could have occurred since initial construction. Thus, the adjustment should rightly account for how much the deck is currently valued in the marketplace, thereby aiding in delivering a precise and effective comparative analysis for the appraisal process.