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The Student Handbook toTHE APPRAISAL OF REAL ESTATE

Chapter 19

Applications of the Sales Comparison Approach

Chapter 19 2Student Handbook to THE APPRAISAL OF REAL ESTATE

Quantitative Adjustment Techniques Bracketing the subject allows the analyst to

extract adjustment rates easily on a spreadsheet program.

Three different grids are presented to show how the rate of adjustment can be extracted. The first grid shows a rate of $10/sq. ft., the second grid shows $40/sq. ft., and the third grid shows $30/sq. ft.

Chapter 19 3Student Handbook to THE APPRAISAL OF REAL ESTATE

Table 19.1 Matched Pair Analysis Using a Sensitivity Analysis for Sales

Subject Comparable 1 Comparable 2Price $510,000 $400,000 Rights trnsfrd. Fee simple Fee simple 0.00% Leased fee -5.00%Subtotal $510,000 $380,000 Financing Cash to seller Cash to seller 0.00% Cash to seller 0.00%Subtotal $510,000 $380,000 Cond. of sale Arm's-length Motivated seller 5.00% Arm's-length 0.00%Subtotal $535,500 $380,000 Expenditures after sale None Minor repairs 5.00% None 0.00%Subtotal $562,275 $380,000 Market conditions Current One month ago 0.50% Five months ago 2.50%

$565,086 $389,580

Location adjustment Northeast side Northeast side Northeast sideZoning Commercial -1 Commercial-1 Commercial-1Site size 20,000 sq. ft. 20,000 sq. ft. 20,000 sq. ft.Building design One story/avg. One story/avg. One story/avg.Construction quality Masonry/avg. Masonry/avg. Masonry/avg.Improvement age 14 years 14 years 14 yearsImprovement condition Average Average Average

9,000 12,000 -$30,000 6,000 +$30,000Second floor area (sq. ft.) 0 0 0AG building area (sq. ft.) 9,000 12,000 6,000Finished area 75% 75% 75%Basement sq. ft. 0 0 0Functional obsol. Typical only Typical only Typical onlyOther None None NoneNet adjustment -$30,000 +$30,000

$535,086 $419,580

Current, cash-equivalent price

Indicated value

First floor area (sq. ft.) @ $10

Chapter 19 4Student Handbook to THE APPRAISAL OF REAL ESTATE

Table 19.2 Revised Matched Pair Analysis Using a Sensitivity Analysis for Sales

Subject Comparable 1 Comparable 2Price $510,000 $400,000 Rights trnsfrd. Fee simple Fee simple 0.00% Leased fee -5.00%Subtotal $510,000 $380,000 Financing Cash to seller Cash to seller 0.00% Cash to seller 0.00%Subtotal $510,000 $380,000 Cond. of sale Arm's-length Motivated seller 5.00% Arm's-length 0.00%Subtotal $535,500 $380,000 Expenditures after sale None Minor repairs 5.00% None 0.00%Subtotal $562,275 $380,000 Market conditions Current One month ago 0.50% Five months ago 2.50%

$565,086 $389,580

Location adjustment Northeast side Northeast side Northeast sideZoning Commercial -1 Commercial-1 Commercial-1Site size 20,000 sq. ft. 20,000 sq. ft. 20,000 sq. ft.Building design One story/avg. One story/avg. One story/avg.Construction quality Masonry/avg. Masonry/avg. Masonry/avg.Improvement age 14 years 14 years 14 yearsImprovement condition Average Average Average

9,000 12,000 -$120,000 6,000 +$120,000Second floor area (sq. ft.) 0 0 0AG building area (sq. ft.) 9,000 12,000 6,000Finished area 75% 75% 75%Basement sq. ft. 0 0 0Functional obsol. Typical only Typical only Typical onlyOther None None NoneNet adjustment -$120,000 +$120,000

$445,086 $509,580

Current, cash-equivalent price

Indicated value

First floor area (sq. ft.) @ $40

Chapter 19 5Student Handbook to THE APPRAISAL OF REAL ESTATE

Table 19.3 Third Revised Matched Pair Analysis Using a Sensitivity Analysis for Sales Subject Comparable 1 Comparable 2

Price $510,000 $400,000

Rights trnsfrd. Fee simple Fee simple 0.00% Leased fee -5.00%

Subtotal $510,000 $380,000

Financing Cash to seller Cash to seller 0.00% Cash to seller 0.00%

Subtotal $510,000 $380,000

Cond. of sale Arm's-length Motivated seller 5.00% Arm's-length 0.00%

Subtotal $535,500 $380,000

Expenditures after sale None Minor repairs 5.00% None 0.00%

Subtotal $562,275 $380,000

Market conditions Current One month ago 0.50% Five months ago 2.50%

$565,086 $389,580

Location adjustment Northeast side Northeast side Northeast side

Zoning Commercial -1 Commercial-1 Commercial-1

Site size 20,000 sq. ft. 20,000 sq. ft. 20,000 sq. ft.

Building design One story/avg. One story/avg. One story/avg.

Construction quality Masonry/avg. Masonry/avg. Masonry/avg.

Improvement age 14 years 14 years 14 years

Improvement condition Average Average Average

9,000 12,000 -$90,000 6,000 +$90,000

Second floor area (sq. ft.) 0 0 0

AG building area (sq. ft.) 9,000 12,000 6,000

Finished area 75% 75% 75%

Basement sq. ft. 0 0 0

Functional obsol. Typical only Typical only Typical only

Other None None None

Net adjustment -$90,000 +$90,000

$475,086 $479,580

Current, cash-equivalent price

Indicated value

First floor area (sq. ft.) @ $30

Chapter 19 6Student Handbook to THE APPRAISAL OF REAL ESTATE

Elements of Comparison Real Property Rights Conveyed Financing Terms/Cash Equivalency Conditions of Sale Expenditures Made Immediately After the Sale Market Conditions Location Physical Characteristics Economic Characteristics Use/Zoning Non-Realty Components of Value

Chapter 19 7Student Handbook to THE APPRAISAL OF REAL ESTATE

Table 19.4 Qualitative Analysis

Subject

Sale price $500,000 $550,000 $625,000

Rights transferred Fee simple Fee simple Fee simple Fee simple

Financing Cash to seller Contract Superior Cash to seller Cash to seller

Conditions of sale Arm's-length Arm's-length Arm's-length Arm's-length

Expend. after purchase None needed None needed None needed Minor repairs Inferior

Date of sale Today July January June

Location $80,000 site $65,000 site Inferior $80,000 site $85,000 site Superior

Building design One story/avg. One story/avg. One story/avg. One story/avg.

Const. quality Steel/avg. Brick/equal Frame/infer. Inferior Steel/equal

Improvement age 8 years 12 years Inferior 9 years Inferior 5 years Superior

Improvement condition Average Equal Equal Equal

AG building area 6,086 5,000 Inferior 6,000 8,000 Superior

Basement (sq. ft.) 3,500 2,000 Inferior 3,500 4,500 Superior

Finished bsmt. (sq. ft.) 2,000 Unfinished Inferior 2,000 2,000

Functional utility Average Average Average Average

Garage 2 car/att. 2 car/att. 2 car/att. 2 car/att.

Other None None I.G. pool Superior None

Indication for the subject Much inferior Nearly equal Much superior

Comparable 1 Comparable 2 Comparable 3

597 E. North Street 579 E. Hill Street 593 N. Webb Avenue 571 E. Oak Street

Chapter 19 8Student Handbook to THE APPRAISAL OF REAL ESTATE

Problems

Suggested solutions begin on page 365.

Chapter 19 9Student Handbook to THE APPRAISAL OF REAL ESTATE

Problem 4Subject Comparable 1 Comparable 2

Price per sq. ft. GBA $163.79 $475,000 $125.00 $525,000 Rights transferred Fee simple Fee simple 0.00% Fee simple 0.00%Subtotal $475,000 $525,000 Financing Cash to seller Cash to seller 0.00% Cash to seller 0.00%Subtotal $475,000 $525,000 Conditions of sale Arm's-length Arm's-length 0.00% Arm's-length 0.00%Subtotal $475,000 $525,000 Post purchase repairs None None 0.00% None 0.00%Subtotal $475,000 $525,000 Market conditions Current 6 months ago 0.00% 9 months ago 0.00%

$475,000 $525,000

Location Greenleave addn Greenleave addn Greenleave addnSite size (acres) 1.25 1.00 +$10,000 0.75 +$15,000 Site view Golf course Golf course Residential +$10,000 Building design 2 story/avg. 2 story/avg. 2 story/avg.Construction quality Wood/frame/avg. Masonry/frame -$10,000 Masonry/frame -$10,000

23 18 -$10,000 23Improvement condition Average Average AverageRoom count 9 | 4 | 2.5 11 | 4 | 3.5 -$5,000 12 | 4 | 4.5 -$10,000AG living area @ $45 2,943 2,900 4,200 -$55,000Basement area @ $20 756 1,200 -$10,000 1,500 -$15,000Basement finish @ $20 650 1,000 -$5,000 500 +$5,000 Functional obsolescence Average Average AverageGarage/parking 3-car/att. 3-car/att. 4-car/att. -$10,000Miscellaneous Irrigation Equal EqualPorches, patios, etc. Enclosed porch/deck None +20,000 EqualFeatures Standard Standard StandardFireplaces 1 Fireplace 1 Fireplace 1 FireplaceNet adjustment -$10,000 -$70,000 $465,000 $455,000

Current, cash-equivalent price

Improvement age @ $2,000/yr.

Chapter 19 10Student Handbook to THE APPRAISAL OF REAL ESTATE

Problem 5

Calculate the paymentTerm 30 x 12 (monthly) NInterest rate 7 I/yearPV -175,000Solve for PMT $1,164.28FV 0Calculate the balanceChange N to 72Solve for FV 162,210

Change the yield to the market yieldChange I/YR to 9Solve for PV 159,308Add the down payment 70,000Cash-equiv. sale price 229,308

Chapter 19 11Student Handbook to THE APPRAISAL OF REAL ESTATE

Problem 6

Sale Date Price1 1 month ago 200,000$ 1 37 months ago 195,000 Change Overall Mo. Change Annual Change

36 months difference 5,000$ / 195,000$ / 2.564% / 36 = 0.0712% x 12 = 0.855%

2 3 month ago 195,000$ 2 28 months ago 187,000

25 months difference 8,000$ / 187,000$ / 4.278% / 25 = 0.1711% x 12 = 2.053%

3 1 month ago 210,000$ 3 28 months ago 210,000

27 months difference -$ / 210,000$ / 0.000% / 27 = 0.0000% x 12 = 0.000%

4 2 month ago 192,000$ 4 12 months ago 187,000

10 months difference 5,000$ / 187,000$ / 2.674% / 10 = 0.2674% x 12 = 3.21%

Chapter 19 12Student Handbook to THE APPRAISAL OF REAL ESTATE

Problem 7

Subject Comparable 1 Comparable 2 Comparable 3Sale price $200,000 $175,000 $275,000Price/AGLA $80.00 $76.09 $43.65 Value adjustmentsSales-financing concessions Assume none No concessions No concessions $ - No concessions

8 mos. ago $4,000 4 mos. ago $1,800 4 mos. ago +$2,800Location Salty Creek Salty Creek Salty Creek Johnson AcresSite 5 acres 1 acre +$12,000 $0.75 +$17,000 5 acresView Residential/pond Residential +$5,000 Residential +$5,000 Residential +$5,000Design/appeal 2 story/avg. 2 story/avg. 2 story/avg. 2 story/avg.Construction quality Brick/good Brick/average +$5,000 Brick/average +$5,000 Brick/goodAge @ $3,000/yr. 5 yrs. 1 yr. -$12,000 2 yrs. -$9,000 12 yrs. +$21,000Condition Average Average Average AverageAbove grade room count 10 | 4 | 3.5 10 | 4 | 2.5 +$2,000 10 | 4 | 2.5 +$2,000 11 | 4 | 2.5 +$2,000Above grade living area @ $20 6,000 2,500 +$70,000 2,300 +$74,000 6,300 -$6,000Basement area @ $8 2,000 1,200 +$6,400 1,000 $8,000 2,500 -$4,000Finished basement @ $8 1,500 900 +$4,800 0 +$12,000 1,800 -$2,400Functional utility Average Average Average AverageHVAC GFA/cent. AC GFA/cent. AC GFA/cent. AC GFA/cent. ACGarage/carport 3-car/att. 2-car/att. +$4,000 2-car/att. +$4,000 3-car/att.Porch/patio Scr. porch Scr. porch Scr. porch Scr. porchFireplace 2 Fireplaces 1 Fireplace +$1,000 1 Fireplace +$1,000 2 FireplacesKitchen Standard kitchen Standard kitchen Standard kitchen Standard kitchenNet adjustment +$102,200 +$120,800 +$18,400Adjusted sale price of comparable $302,200 $295,800 $293,400

Date sale/time/market conditions @ 3.0%/yr.

Chapter 19 13Student Handbook to THE APPRAISAL OF REAL ESTATE

Problem 8

Subject Comparable 1 Comparable 2Sale price $80,000 $95,000Price/AGLA $80.00 $47.50 Value adjustments

Assume none No concessions No concessionsDate of sale/time 2 mos. ago +$400 4 mos. ago +$1,000Location Palmer's Addn. Palmer's Addn. Palmer's Addn.Site (acres) 0.33 0.33 0.33View Residential Residential ResidentialDesign/appeal Bi-level/avg. 1 story/avg. 2 story/avg.Construction quality Brick/average Brick/average Brick/averageAge 32 32 33Condition Average Average AverageAbove grade room count 5 | 3 | 2 6 | 3 | 2 9 | 4 | 2

1,000 1,000 2,000 -$25,0001,000 1,000 No basement +$10,000

1,000 w/o 0 +$12,000 No basement +$12,000Functional utility Average Average AverageHVAC GFA/cent. AC GFA/cent. AC GFA/cent. ACEnergy efficiency Standard Standard StandardGarage/carport 2-car/att. 2-car/att. 2-car/att.Porch/patio Deck Deck DeckFireplace 1 Fireplace 1 Fireplace 1 FireplaceKitchen Standard kitchen Standard kitchen Standard kitchenFence/pool None None NoneNet adjustment +$12,400 -$2,000Adjusted sale price of comparable $92,400 $93,000

Sales-financing concessions

Above grade living area @ $25Basement area sq. ft. @ $10Finished basement sq. ft. @ $12

Chapter 19 14Student Handbook to THE APPRAISAL OF REAL ESTATE

Problem 9

Subject Comparable 1 Comparable 2 Comparable 3

Address 1200 W. 400 WSale price $175,000 $141,900 $189,000 $169,000Price/AGLA $81.00 $90.00 $73.48 Days on market 334 49 4Value adjustmentsFinancing Assume conv. Conv. mort Contract sale Conv. mortConcessions Mortgage or cash no concessions Favorable terms -$9,500 no concessions

0 6 4 4Location 1200W 400N 1500W 350 N 500N 150 W 150S 50WLeasehold/fee simple Fee simple Fee simple Fee simple Fee simpleSite (acres) 27 acres 12 acres +$9,000 22 acres +$2,000 8 acres +$15,000View Wooded/school Wooded Wooded WoodedDesign/appeal 2 story/avg. 1 story/avg. 2 story/avg. 2 story/avg.Construction quality Log construction Wd/brick/avg. Wd/brick/avg. Wd/stn/avg.Age @ $3,000/yr. 10 yrs. 6 yrs. -$8,000 7 yrs. -$6,000 9 yrs. -$2,000Condition Average Average Average AverageAbove grade room count 8 | 3 | 2 7 | 3 | 2 9 | 3 | 2 8 | 4 | 3 -$2,000

2,000 1,752 +$6,200 2,100 -$2,500 2,300 -$7,5001,400 0 +$16,800 1,000 +$4,800 1,000 +$4,800

0 0 W/O style -$3,000 0Functional utility Average/log Average Average AverageHVAC GFA/cent. AC GHW/no AC +$3,500 GFA/cent. AC GFA/cent. ACEnergy efficiency Standard Standard Standard StandardGarage/carport 2-car/att. 600 sq. ft. 2-car/dt.600 sq. ft. +$1,000 2-car/att. 600 sq. ft. 2-car/att. 600 sq. ft.Porch/patio Scr. porch Fence, shed +$2,000 Scr. porch Porch +$5,500

Porch 528 sq. ft. shop -$3,500Fireplaces 1 Fireplace 1 Fireplace 1 Fireplace 1 FireplaceFence, pool, etc. None None None NoneOther Appliances Equal Equal EqualNet adjustment +$30,500 -$17,700 +$13,800Adjusted sale price of comparable $172,400 $171,300 $182,800

500 N. 150W 150 S 50W1500 W. 350 N

Date of sale/time @ 0.0%/yr.

Above grade living area sq. ft. @ $25Basement area sq. ft. @ $12Finished basement sq. ft. @ $12