An appraiser is valuing a commercial building. The owner recently had the parking lot paved at a cost of $50,000. Comparable Sale 2 has a gravel parking area. Which statement is the most correct regarding the adjustment for the paved parking area?

• A. The adjustment must be exactly equal to the paving cost
• B. The adjustment may be less than the cost, the same as the cost, or more than the cost, depending on the market
• C. The adjustment must be greater than the cost
• D. The adjustment does not apply to paved parking

Answer: (B)

In the Sales Comparison Approach, adjustments for differences between the subject property and comparables come from market evidence of what those differences are worth, not from the cost to create them. The paved parking is a feature difference between the subject and the comparable with gravel. The amount you adjust the comparable’s price by should reflect the market’s valuation of that feature, which can vary. It might be less than the cost of paving, exactly the cost, or more than the cost depending on how buyers value paved parking. Therefore, the adjustment may be less than the cost, the same as the cost, or more than the cost, depending on market data. To determine the estimate, you’d look at market evidence from similar properties with paved versus gravel parking and derive the contributory value from that data.