Chapter 8 CHAPTER TERMS AND CONCEPTS Adjustment techniques Assessment Roll Bracketing Buyer s motives Central tendency Comparable sale Comparable sale search area Competitive property ID: 605206
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THE SALES COMPARISON APPROACH
Chapter
8Slide2
CHAPTER TERMS AND CONCEPTSAdjustment techniquesAssessment RollBracketingBuyer
’s motivesCentral tendencyComparable sale
Comparable sale search areaCompetitive propertyConcessionsLinear and multiple regressionsLocationMeanMedianMode2Slide3
CHAPTER TERMS AND CONCEPTSOpen-market transactionPhysical characteristicsPublic recordsRange
Sales comparison approachSales history
SampleSeller’s motivesStandard deviationSubmarketTerms of saleVariablesVerification3Slide4
LEARNING OUTCOMESList and explain the four steps in the sales comparison approach.
Explain the important concepts behind this approach.
Explain how to decide if a sale is comparable.Discuss what information about a comparable sale should be collected.Identify the major sources of market data.Outline the statistical techniques appraisers can use to analyze sales.4Slide5
SALES COMPARISON APPROCHCollect Comparable SalesMLS, Public Record, Commercial databasesAnalyze and Compare them to the Subject PropertyAdjust for Differences between the Sales and the Subject (market adjustments)Arrive at a Value Opinion for Subject Property
5Slide6
Sales Comparison Approach Steps6
Figure 8-1Slide7
Key Concepts of the Sales Comparison Approach• The importance of substitution• The simplicity of market comparisons• The relationship to statistics• The relevance of adjustments• The significance of market data
7Slide8
SIGNIFICANCE OF SALES COMPARISON APPROACHBased upon the Principle of Substitution
Simple, Direct and ReliableHas Statistical Connections
Includes Methods for Adjusting for Property DifferencesProvides Data for Other ApproachesIncome and cost approaches8Slide9
STATISTICAL CONNECTIONSSamples Market ActivityIdentifies Market Patterns
Brackets the ValueIndicates the Most Probable Price
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SELECTING THE COMPARABLE SALESThe Competitive PropertySame neighborhood?Define search areaOpen-Market TransactionsListed in MLS?
Date of SaleClose to date of valuation
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SELECTING THE COMPARABLE SALESHow Comparable?Square footage, # bedrooms, # bathsDesign, age, & amenitiesSales History of Subject
Three years prior to date of value
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What Is a Comparable Sale?12
Figure 8-5Slide13
COMPARABLE SALES DATATransaction DataDate of saleSales price and terms
Legal descriptionGrantor and granteePersonal property included
Motivation of PartiesPhysical DataLand: Size, shape, topography, utilities availableImprovements: size & type, quality, condition, special features, any problems13Slide14
COMPARABLE SALES DATALegal DataZoningTaxes and assessments
Public and private restrictionsLocation
ComparabilityDetrimental influencesMarket ConditionsGeneral state of the marketAvailability of financing14Slide15
TESTS OF COMPARABILITYEach Comparable Sale Should BeA competitive propertyAn open market transactionClose in time to the date of value
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Comparing Locations16
Figure 8-8Slide17
MARKET DATA SOURCESPublic RecordsMultiple Listing Services (MLS)
Private/Commercial Data ServicesTitle Insurance Companies
Parties to the TransactionAppraisers’ Files17Slide18
SAMPLE GRANT DEED18Slide19
SALES DATA EXAMPLE19
Figure 8-10Slide20
DATA RESOURCES ON THE INTERNETWebsites of Government AgenciesGeneral data on the economyRegulatory information affecting real estate
Websites of Industry Service Organizations Industry trends and guidelines
Construction cost estimating servicesMarket data banks, appraisal support20Slide21
DATA RESOURCES ON THE INTERNETWebsites of Trade AssociationsMember information services
General information for the public21Slide22
APPRAISAL STATISTICAL CONCEPTSCentral TendencyMean = Average value or priceMedian = Middle value or priceMode = Most common value or price
Range = Difference between high and low valueStandard Deviation = Description of how values differ from the meanLinear and Multiple RegressionCan
Calculate relationships between property features and property priceCan Suggest value of the subject property22Slide23
SUMMARY23
The sales comparison approach is one of the three approaches
used to estimate value. The main feature of the sales comparison approach is the process of analyzing sales and comparing them to the subject property, based on the principle of substitution. Thesales comparison approach consists of four steps.1. Research the sales.2. Analyze the sales.3. Adjust the sales for differences between the sales and the subject property.
4. Arrive at a value estimate.