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ANALYZING AND ADJUSTING COMPARABLE SALES

Chapter 9. ANALYZING AND ADJUSTING COMPARABLE SALES. CHAPTER TERMS AND CONCEPTS. Automated valuation model (AVM) Comparison process Date of sale Depreciated cost method Direct comparison method Economic unit of comparison Elements of comparison method Gross income multiplier (GIM)

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ANALYZING AND ADJUSTING COMPARABLE SALES

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  1. Chapter 9 ANALYZING AND ADJUSTING COMPARABLE SALES

  2. CHAPTER TERMS AND CONCEPTS • Automated valuation model • (AVM) • Comparison process • Date of sale • Depreciated cost method • Direct comparison method • Economic unit of comparison • Elements of comparison method • Gross income multiplier (GIM) • Linear regression • Location elements • Lump-sum dollar adjustment • Matched pair • Multiple regression • Percentage adjustment • Physical elements • Physical unit of comparison • Sales adjustment grid • Sales graph • Terms and conditions of sale • Total property comparison • Unit of comparison • Value range

  3. LEARNING OUTCOMES Name the four elements of sales comparison. List the three rules for making adjustments. Name the three types of adjustments most commonly used. Explain how a value conclusion is reached.

  4. Which is more attractive to buyers?

  5. ELEMENTS OF COMPARISON Terms and Conditions of Sale Time of Sale Location Physical Features

  6. Elements of Comparison

  7. PRICE VS. TERMS OF SALE • Seller Financing • Better or worse than Standard? • Assumed Financing • Better terms? • Seller-Paid Points • Generally, Buyer pays points. • In a Buyer’s market, Seller may pay points

  8. COMPARING & ADJUSTING SALES • Identify and Compare Sales Characteristics • Make Market-Derived Adjustments that are: • Reasonable • Are consistent among the sales • Explain the price differences between the sales & subject

  9. RULES FOR MAKING ADJUSTMENTS • Adjust the Sale to the Subject • Use Market-Derived Adjustments • Adjust in the Proper Order • Terms/conditions • Time • Location • Physical features

  10. TYPES OF SALES ADJUSTMENTS • Lump Sum Dollar • Percentage • Units of Comparison

  11. The Adjustment Process Figure 9-2

  12. URAR FORM ANALYSIS GRID Figure 9-4

  13. UNITS OF COMPARISON SALES ADJUSTMENTS • Total Property • Price of similar sale • May involve ranking the sales • Physical Units • Price per square foot, price per acre • Price per room • Price per dwelling unit • Economic Units • Price per buildable dwelling unit • Price per developable building area • Gross income multipliers

  14. GRAPHING THE SALES

  15. USING MATCHED PAIRS • Adjusting Sales with the Direct Market Method • Finding Adjustments for Size • Subject: 2,600 SF living area • Sales: Similar, except different in size • Adjustment: Search for sales differing only in size

  16. USING MATCHED PAIRS $10,000÷200 SF = $50 SF Change • Evidence • 2,500 SF • 2,700 SF • Calculation: • Sale Size Price • B= 2,700 SF $280K • A= 2,500 SF$270K • Difference 200 SF $10 K • Adjustment for Size:

  17. ESTIMATING ADJUSTMENTS BY DEPRECIATED COST • Difference • Subject has 440 SF garage • Comparable sale has no garage • Unit cost new is estimated at $33.50/SF • Cost New of Garage • Size 440 SF @ $33.50 per SF • Total replacement cost • 440 SF X $33.50 per SF = $14,470

  18. ESTIMATING ADJUSTMENTS BY DEPRECIATED COST • Depreciation • Age of subject garage = 29 yrs • Economic life = 100 yrs • % depreciation = 29/100 = 29% • Amount of depreciation is 29% of $14,470 or $4,275 • Adjustment Amount • Cost new $14,470 • Less: Depreciation - $4,275 • Equals: Amt. of adjust rounded $10,000

  19. ADJUSTING FOR SALE TERMS OR CONDITIONS

  20. Using Linear Regression to Analyze Sales Figure 9.8

  21. AUTOMATED VALUATION MODELS • Computer Software Program • Analyzes data in specified area or neighborhood • Relates results of database search to subject property information imputed into the model. • When Applied to an Individual Property It Is Not an Appraisal. • An AVM May Become the Basis for an Appraisal

  22. ARRIVING AT AN INDICATED VALUE

  23. ARRIVING AT AN INDICATED VALUE • Review the Entire Approach • Comparability • Activity levels • Adjustment accuracy • Statistical limits • Lagging the market • Motivation

  24. ARRIVING AT AN INDICATED VALUE • Review the Sales Data • Sales data • Adjustments • Estimate Value Range • Value range shown by comparable • Upper and lower limits • Select a Final Value

  25. SUMMARY Analyzing and adjusting comparable sales rely on two main methods: the direct comparison method and the elements of comparison method. The direct comparison method simply compares the overall desirability of each sold property with that of the subject, without any adjustments. The elements of comparison method compares the sales with reference to the details of four critical elements: the terms and conditions of sale, the time of sale, the location elements, and the physical elements of the properties.

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