Adjusted Sale Price

In an appraisal, the indicated price of a comparable property after adjustments has been made to account for differences between comparable and subject properties. Real estate appraisers estimate a property’s fair market value to the comparables that have been closed recently. Two properties are never exactly alike. The two properties occupy separate spaces.

Comparables (or comps) is a financial term that is a real estate appraisal term referring to properties with characteristics that are similar to a subject property whose value is being sought. The subject property is the property which is being assessed. It is the property for which the borrower is attempting to secure financing or refinancing. The property could either be primary, secondary or an investment property. The type of the property determines the type of financing options that would be available.

The appraiser starts with the official price of each of the comparables used. The next step is that the appraiser makes positive or negative adjustments to the sale price based on the difference between the comparable and the subject.

Let us take an example. There are two properties. Property A is being appraised, and property B is similar to A which has been sold recently. Property B has some features that property A does not have. The sale price of property B would be lower if it lacked the feature as property A and a downward adjustment would have been made. Likewise property B lacks some features that property A possesses. If property B had those features then there would be an upward adjustment in property B’s sale price.

The comparable property is identical to the subject property except that the comparable property would have additional bath. For example the sale price of $ 170, 000 is adjusted by subtracting $6000 for each bath. Therefore the adjusted sales price is $164,000.

Questions

• What is adjusted sale price?
• What are comparables and subject property?