Nature of the Approach
Imperfections of real estate markets
Necessity for use of appraisers
Data collection and Verification
Addition and subtraction of value differences
Adjustment of comparables' prices
Elements of Comparison
Conditions of sale
Economic characteristics (Income properties)
Obtaining Comparable Properties
Meaning of comparability
Transaction should have occurred within preceding one or two years
Minimum number of transactions required
Methods of Adjustment
Units of comparison
Sequence of Adjustments
Financing terms and conditions of sale (Normal sale price)
Market conditions (Adjusted normal sale price)
Location, physical characteristics, and economic (Final adjusted sale price)
Dollar adjustments--any sequence o.k.
Comparable Sales Example
Subj.: 3 bdrm, 2 bath, 1-car gar., 2100 s.f.
Sales Price = $98,000
3 bedroom, two bath, 1-car garage, 2000 s.f.
Sales Price = $108,000
3 bedroom, two bath, 2-car garage, 2200 s.f.
Sales Price = $101,000
3 bedroom, one bath, 1-car garage, 2200 s.f.
Sales Price = $93,000
3 bedroom, one bath, 1-car garage, 2000 s.f.
Sales Comparison Adjustments
Adjustment for Bathrooms: Compare Sale 1 and Sale 4; $5,000 difference for bath.
Adjustment for Size: Compare Sale 1 and Sale 3; If Sale three had 2 baths, it would have sold for $106,000, so the extra 200 s.f. cost an extra $8,000 or $40 per s.f.
Adjustment for extra garage stall: Compare Sale 1 and Sale 2; If sale 2 had 2000 s.f. it would have sold for $100,000, so the extra garage cost $2,000.
Sales Comparison Adjustment Grid
Sale1 Sale2 Sale3 Sale4
Price $98,000 $108,000 $101,000 $93,000
Garages $0 -$2,000 $0 $0
Baths $0 $0 +$5,000 +$5,000
Size +$4,000 -$4,000 -$4,000 +$4,000
$102,000 $102,000 $102,000 $102,000
Indicated Sales Price is then $102,000
Presentation of Adjustment Process (See Exhibit 9.4, pp. 143-145)
The Value Conclusion
Applicability of Comparable Sales Analysis
Use of subject and comparable must be same