5.1 CMA Adjustment Rules (CBS & CIA) & The Three Approaches to Value

🎯 Key Florida Real Estate Statutory Takeaways

• In CMAs and appraisals, adjustments are ALWAYS made to the COMPARABLE property, never to the subject property.
• Adjustment rules: CBS (Comparable Better, Subtract) and CIA (Comparable Inferior, Add).
• Cost-Depreciation Approach: Reproduction/Replacement cost minus accrued depreciation plus land value.
• Three depreciation types: Physical deterioration (wear and tear), Functional obsolescence (poor layout), External obsolescence (outside highway/zoning factors).

Real estate valuation relies on three fundamental appraisal approaches: Sales Comparison, Cost-Depreciation, and Income Capitalization. A Comparative Market Analysis (CMA) is a pricing evaluation developed by licensees using sales comparison principles, examining recent sales, active listings, and expired properties.

In sales comparison, the subject property's value is estimated by adjusting the actual sale prices of recently sold comparable properties. Adjustments are ALWAYS made to the comparable property's sale price, never to the subject. Two rules govern adjustments: (1) CBS — If the Comparable is Better than the subject in a feature, Subtract that feature's value from the comparable; (2) CIA — If the Comparable is Inferior to the subject, Add the feature's value to the comparable.

The Cost-Depreciation Approach is best suited for unique, special-purpose properties (schools, churches, government buildings) or new construction where comparable sales are scarce: Estimated Value = Cost of Improvements (Reproduction or Replacement) - Accrued Depreciation + Just Market Value of the Land. Land is valued separately using sales comparison because land does not depreciate.

Accrued depreciation falls into three categories: (1) Physical Deterioration (wear and tear, peeling paint, deferred maintenance); (2) Functional Obsolescence (flaws in architectural design, outdated fixtures, over-improvements, or inadequate layout like walking through a bedroom to reach a bathroom); and (3) External (Economic) Obsolescence (adverse economic, environmental, or locational factors outside the property lines, such as airport flight paths or an expressway, which is always incurable).

⚠️ Common Pearson VUE / FREC Exam Traps

• Adjusting the subject property — the subject is the unknown benchmark; always adjust comparable prices up or down.
• Classifying an outdated floor plan as physical deterioration — outdated design within the property is functional obsolescence.
• Assuming external economic obsolescence is curable — external factors outside property boundaries are always incurable.