The Student Handbook to THE APPRAISAL OF REAL
The Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 Applications of the Sales Comparison Approach
Quantitative Adjustment Example n n Bracketing the subject allows the analyst to extract adjustment rates easily on a spreadsheet program. Three different grids are presented to show the rate of adjustment can be extracted. The first grid shows a rate of $10 per square foot, the second shows $40 per square foot, and the third shows $30 per square foot. Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 2
Matched Pair Analysis Using a Sensitivity Analysis for Sales Subject Price Rights transferred Subtotal Financing Subtotal Conditions of sale Subtotal Expenditures after sale Subtotal Market conditions Current, cash-equivalent price Location adjustment Zoning Site size (sq. ft. ) Building design Const. quality Improvement age Improvement condition First floor area (@ $10/sq. ft. ) Second floor area Above-ground building area Finished area Basement area (sq. ft. ) Functional obsolescence Other Net adjustment Indicated value Comparable 1 Comparable 2 fee simple cash to seller arm’s-length motivated seller none minor repairs current one month ago Northeast Side Commercial-1 20, 000 one story/avg. masonry/avg. 14 years average $400, 000 -5. 00% $380, 000 $0 $380, 000 0. 00% $380, 000 2. 50% $389, 500 leased fee cash to seller arm’s-length none five months ago Northeast Side Commercial-1 20, 000 one story/avg. masonry/avg. 14 years average 9, 000 0 9, 000 75% 0 typical only none $510, 000 0. 00% $510, 000 $0 $510, 000 5. 00% $535, 500 5. 00% $562, 275 0. 50% $565, 086 one story/avg. masonry/avg. 14 years average 12, 000 0 12, 000 75% 0 typical only none -30, 000 0 − $30, 000 $535, 086 6, 000 0 6, 000 75% 0 typical only none 30, 000 0 $30, 000 $419, 500 Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 3
Revised Matched Pair Analysis Using a Sensitivity Analysis for Sales Subject Current, cash-equivalent price First floor area (@ $40/sq. ft. ) Indicated value Comparable 1 9, 000 $565, 086 12, 000 − 120, 000 $445, 086 Comparable 2 6, 000 $389, 580 120, 000 $509, 580 Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 4
Second Revised Matched Pair Analysis Using a Sensitivity Analysis for Sales Subject Current, cash-equivalent price First floor area (@ $30/sq. ft. ) Indicated value Comparable 1 9, 000 12, 000 − Comparable 2 $565, 086 90, 000 $475, 086 6, 000 $389, 580 90, 000 $479, 580 Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 5
Qualitative Analysis Address Sale price Rights transferred Financing Conditions of sale Expend. after purch. Date of sale Location/site/view Building design Const. quality Improvement age Imprv. condition Abv. -grd. bldg. area Basement area Finished basement Functional utility Garage Other Overall comparison Subject 597 E. North St. Comparable 1 579 E. Hill St. Comparable 2 593 N. Webb Ave. $500, 000 fee simple cash to seller arm’s-length none needed today $80, 000 site one story/avg. steel/average 8 years average 6, 086 sq. ft. 3, 500 sq. ft. 2, 000 sq. ft. fee simple contract arm’s-length none needed July $65, 000 site one story/avg. brick/equal 12 years equal 5, 000 sq. ft. 2, 000 sq. ft. unfinished average 2 -car att. none superior inferior inferior Comparable 3 571 E. Oak St. $550, 000 fee simple cash to seller arm’s-length none needed January $80, 000 site one story/avg. frame/inferior 9 years equal 6, 000 sq. ft. 3, 500 sq. ft. 2, 000 sq. ft. finished average 2 -car att. in-ground pool much inferior superior nearly equal $625, 000 fee simple cash to seller arm’s-length minor repairs June $85, 000 site one story/avg. steel/equal 5 years equal 8, 000 sq. ft. 4, 500 sq. ft. 2, 000 sq. ft. finished average 2 -car att. none inferior superior much superior Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 6
Quantitative Adjustment and Quantitative Analysis Address Data source Gross sale price Price/sq. ft. & /acre Rights transferred Subtotal Financing Subtotal Conditions of sale Subtotal Expenditures after sale Subtotal Date of sale 0. 25% Subtotal Topography Location Access Visibility Flood area Road frontage Average depth Size (square feet) Size (acres) Zoning Utilities Other factors Indicated value/acre Subject 12345 N. Main Street Sale 1 209 S. Main Street MLS $0 fee simple $3. 35 fee simple assume cash contract sale arm’s-length arm’s- length none assumed none now 4 mos. ago level Smallburg 3 points avg. /industrial level Smallburg 2 points isolated 0. 00% 325 390 126, 750 2. 91 industrial all public none 0. 00% 300 400 130, 680 3 industrial all public none more than 9944433 $425, 000 $146, 059 0. 00% $146, 059 -5. 00% $138, 756 0. 00% $138, 756 1. 00% $140, 144 inferior $140, 144 per acre Sale 2 1209 S. Elliot Street MLS $3. 59 fee simple cash sale arm’s-length demolition cost 6 mos. ago difficult Smallburg 3 points equal 0. 00% 300 425 127, 500 2. 927 industrial all public rail siding similar to 9934069 $458, 000 $156, 474 0. 00% $156, 474 3. 20% $161, 482 1. 50% $163, 904 inferior superior $163, 904 per acre Sale 3 1985 James Street MLS $3. 88 fee simple cash sale arm’s-length none 8 mos. ago level Hensenville 3 points highway visibility 0. 00% 350 122, 500 2. 812 industrial all public none less than 9804039 $475, 000 $168, 919 0. 00% $168, 919 2. 00% $172, 297 superior $172, 297 per acre Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 7
Review Exercise 4. Suggested Solution Address Price per sq. ft. GBA/price Rights transferred Financing Conditions of sale Post-purchase repairs Date of sale Current, cash-equivalent price Location Site size (acres) Site view Building design Construction quality Improvement age Improvement condition Room count Abv. -ground building area @45 Basement area @20 Basement finish area @20 Functional obsolescence Garage/parking Miscellaneous Porches, patios, etc. Features Fireplaces Net adjustment Indicated value Subject 12345 N. Main St. fee simple cash to seller arm’s-length none assumed current Comparable 1 11232 West St. $163. 79 fee simple cash to seller arm’s-length none reported 6 months ago Greenleave Addn. 1. 25 golf course 2 -story/average wood/frame/avg. 23 average 9/4/2½ 2, 943 756 650 average 3 -car att. garage irrigation enclosed porch/deck standard 1 fireplace Greenleave Addn. 1 golf course 2 -story/average masonry/frame 18 average 11/4/3½ 2, 900 1, 200 1, 000 average 3 -car att. garage equal none standard 1 fireplace $475, 000 0. 00% $475, 000 10, 000 -10, 000 -5, 000 20, 000 0 -10, 000 $465, 000 Comparable 2 1233 East St. $125. 00 fee simple cash to seller arm’s-length none reported 9 months ago Greenleave Addn. 0. 75 acres residential 2 -story/average frame/masonry 23 average 12/4/4½ 4, 200 1, 500 average 4 -car att. garage equal standard 1 fireplace $525, 000 0. 00% $525, 000 10, 000 -10, 000 -55, 000 -15, 000 -10, 000 0 -70, 000 $455, 000 Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 8
Review Exercise 5. Suggested Solution Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 9
Review Exercise 6. Suggested Solution Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 10
Review Exercise 7. Suggested Solution Item Sale price Price/AGLA Date of sale Location Site View Design/appeal Const. quality Age Condition Room count AGLA (20) Basement area (8) Basement finish (8) Functional utility HVAC Garage/carport Porch/patio Fireplace(s) Kitchen Net adjustment Indicated value Subject Comparable 1 Comparable 2 $200, 000 Salty Creek 5 acres residential/pond 2 -story/avg. brick/good 5 years old average 10/4/3½ 6, 000 2, 000 1, 500 average GFA/cent. AC 3 -car att. garage screened porch 2 fireplaces standard kitchen $80. 00 8 months ago Salty Creek 1 acre residential 2 -story/avg. brick/average 1 year old average 10/4/2½ 2, 500 1, 200 900 average GFA/cent. AC 2 -car att. garage screened porch 1 fireplace standard kitchen 4, 000 12, 000 5, 000 -12, 000 70, 000 6, 400 4, 800 4, 000 1, 000 0 102, 200 $302, 200 Comparable 3 $175, 000 $76. 09 4 months ago Salty Creek 0. 75 acre residential 2 -story/avg. brick/average 2 years old average 10/4/2½ 2, 300 1, 000 none average GFA/cent. AC 2 -car att. garage screened porch 1 fireplace standard kitchen 1, 800 17, 000 5, 000 -9, 000 2, 000 74, 000 8, 000 12, 000 4, 000 1, 000 0 120, 800 $295, 800 $275, 000 $43. 65 4 months ago Johnson Acres 5 acres residential 2 -story/avg. brick/good 12 years old average 11/4/2½ 6, 300 2, 500 1, 800 average GFA/cent. AC 3 -car att. garage screened porch 2 fireplaces standard kitchen 2, 800 5, 000 21, 000 2, 000 -6, 000 -4, 000 -2, 400 0 18, 400 $293, 400 Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 11
Review Exercise 8. Suggested Solution Item Sale price Price/AGLA Date of sale Location Site View Design/appeal Construction quality Age Condition Room count AGLA (25) Basement area (10) Basement finish (12, 000) Functional utility HVAC Energy efficiency Garage/carport Porch/patio Fireplaces Kitchen Fence/pool Net adjustment Indicated value Subject Comparable 1 Palmer’s Addition 1/3 acre residential bilevel/avg. brick/average 32 years old average 5/3/02 1, 000 sq. ft. w/o average GFA/cent. AC standard 2 -car att. garage deck 1 fireplace standard kitchen none $80. 00 2 months ago Palmer’s Addition 1/3 acre residential 1 -story/avg. brick/average 32 years old average 6/3/02 1, 000 sq. ft. unfinished average GFA/cent. AC standard 2 -car att. garage deck 1 fireplace standard kitchen none Comparable 2 $80, 000 400 12, 000 0 12, 400 $95, 000 $47. 50 4 months ago Palmer’s Addition 1/3 acre residential 2 -story/avg. brick/average 33 years old average 9/4/02 2, 000 no basement average GFA/cent. AC standard 2 -car att. garage deck 1 fireplace standard kitchen none 1, 000 -25, 000 10, 000 12, 000 0 -2, 000 $93, 000 Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 12
Review Exercise 9. Suggested Solution Item Address Price per GLA Days on market Financing Concessions Date of sale/time Location Leasehold/fee simple Site View Design and appeal Construction quality Age Condition Room count Gross living area Basement Finish Functional utility Heating/cooling Energy-efficient items Garage/carport Porches Residential Sales Comparison Approach Grid Subject Comparable 1 1200 W. 400 N 1500 W. 350 N $175, 000 $87. 50 $80. 99 334 conventional contract sale with conventional mortgage no concessions today 6 months ago 1200 W 400 N 1500 W 350 N fee simple 27 acres 12 acres wooded/school wooded 2 -story 1 -story log construction wood frame/ brick 10 years 6 years average 8/3/02 7/3/02 2, 000 1, 752 1, 400 no, crawl space none average/log average GFA/CAC GHW/no AC standard 2 -car att. /600 2 -car det. /600 screened porch fence, shed, porch Comparable 2 500 N. 150 W $141, 900 Comparable 3 150 S. 50 W $189, 000 $90. 00 49 contract sale 9, 000 -8, 000 6, 200 16, 800 3, 500 1, 000 2, 000 favorable terms 14 months ago 500 N 150 W fee simple 22 acres wooded 2 -story wood frame/ brick 7 years average 9/3/02 2, 100 1, 000 none WO style average GFA/CAC standard 2 -car att. /600 screened porch, 528 sq. -ft. shop 1 fireplace none equal $169, 000 $73. 48 4 conventional mortgage -9, 500 2, 000 -6, 000 -2, 500 4, 800 -3, 000 -3, 500 no concessions 7 months ago 150 S 50 W fee simple 8 acres wooded 2 -story wood frame/ stone 9 years average 8/4/03 2, 300 1, 000 none average GFA/CAC standard 2 -car att. /600 porch 15, 000 -2, 000 -7, 500 4, 800 5, 500 Fireplaces 1 fireplace Fence, pool, etc. none Other appliances, etc. equal 0 0 equal 0 Net adjustment 30, 500 -17, 700 13, 800 Adjusted sale price of comparable $172, 400 $171, 300 $182, 800 GLA Factor 25 The solution above is not the only possible answer. Many of the adjustments are loosely based on percentages rather than dollar amounts from matched-pair extractions. The site adjustments are based on the site values. The age adjustment is loosely based on an estimate of $2, 000 per year, which was extracted as follows: Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 13
Review Exercise 9. Suggested Solution, continued Item Address Price Financing, etc. Landscaping Land value Building value (all components) Comparable 1 1500 W. 350 N Building reproduction cost Basement Garage Porches, etc. Reproduction cost (all components) 1, 752 @ $67 Depreciation (building value - reproduction cost) Age of improvement $ depreciation per year Comparable 2 500 N. 150 W $141, 900 -$5, 000 -$18, 000 $118, 900 12 acres $0 600 @ $15 $117, 384 $0 $9, 000 $3, 000 $129, 384 22 acres 2, 100 @ $65 1, 000 @ $15 600 @ $15 $189, 000 -$9, 500 -$5, 000 -$25, 000 $149, 500 $136, 500 $15, 000 $9, 000 $7, 000 $167, 500 $169, 000 8 acres 2, 300 @ $64 1, 000 @ $15 600 @ $15 -$3, 000 -$12, 000 $154, 000 $147, 200 $15, 000 $9, 000 $4, 000 $175, 200 $10, 484 $18, 000 $21, 200 $6 $1, 747 $7 $2, 571 $9 $2, 356 Student Handbook to THE APPRAISAL OF REAL ESTATE Chapter 20 Comparable 3 150 S. 50 W
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