In an appraisal applying adjustments for financing terms, conditions of sale, and market conditions, what is the proper order of these adjustments?

• A. Financing terms, conditions of sale, market conditions
• B. Market conditions, financing terms, conditions of sale
• C. Conditions of sale, financing terms, market conditions
• D. Financing terms, market conditions, conditions of sale

Answer: (A)

Adjustments in the sales comparison approach are made to isolate each factor that differentiates the subject from the comparables. Start by normalizing financing terms because how a buyer borrows money or the presence of financing concessions can directly affect the price effectively paid. Once financing terms are set to a cash-like basis, address conditions of sale; non-arm’s-length transactions or unusual sale motives influence price independently of financing, so these adjustments come next to reflect the true sale price under normal conditions. Finally, apply market conditions to account for the time difference between the comp and the subject, capturing shifts in value from market trends after other factors have been neutralized. If you changed the order, you could misattribute effects or double-count differences, since the later adjustments would be applying changes that were already influenced by the earlier factors.