Chapter 9 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 ID: 447142
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ANALYZING AND ADJUSTING COMPARABLE SALES
Chapter
9Slide2
CHAPTER TERMS AND CONCEPTSAutomated valuation model(AVM)Comparison processDate of saleDepreciated cost method
Direct comparison methodEconomic unit of comparisonElements of comparison methodGross income multiplier (GIM)Linear regression
Location elementsLump-sum dollar adjustmentMatched pairMultiple regressionPercentage adjustmentPhysical elementsPhysical unit of comparisonSales adjustment gridSales graphTerms and conditions of saleTotal property comparisonUnit of comparisonValue range2Slide3
LEARNING OUTCOMESName 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.3Slide4
Which is more attractive to buyers?4Slide5
ELEMENTS OF COMPARISONTerms and Conditions of SaleTime of SaleLocation
Physical Features5Slide6
Elements of Comparison6Slide7
PRICE VS. TERMS OF SALESeller FinancingBetter or worse than Standard?
Assumed FinancingBetter terms?Seller-Paid PointsGenerally, Buyer pays points.In a Buyer’s market, Seller may pay points
7Slide8
COMPARING & ADJUSTING SALESIdentify and Compare Sales Characteristics
Make Market-Derived Adjustments that are:ReasonableAre consistent among the sales
Explain the price differences between the sales & subject8Slide9
RULES FOR MAKING ADJUSTMENTSAdjust the Sale to the SubjectUse Market-Derived AdjustmentsAdjust in the Proper OrderTerms/conditions
TimeLocationPhysical features9Slide10
TYPES OF SALES ADJUSTMENTSLump Sum Dollar
Percentage Units of Comparison
10Slide11
The Adjustment Process11
Figure 9-2Slide12
URAR FORM ANALYSIS GRID12
Figure 9-4Slide13
UNITS OF COMPARISON SALES ADJUSTMENTSTotal PropertyPrice of similar saleMay involve ranking the sales
Physical UnitsPrice per square foot, price per acrePrice per roomPrice per dwelling unitEconomic UnitsPrice per buildable dwelling unitPrice per developable building area
Gross income multipliers13Slide14
GRAPHING THE SALES14Slide15
USING MATCHED PAIRSAdjusting Sales with the Direct Market MethodFinding Adjustments for Size
Subject: 2,600 SF living areaSales: Similar, except different in sizeAdjustment: Search for sales differing only in size
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USING MATCHED PAIRSEvidence2,500 SF
2,700 SFCalculation:Sale Size PriceB= 2,700 SF $280KA=
2,500 SF $270KDifference 200 SF $10 KAdjustment for Size:16$10,000÷200 SF = $50 SF ChangeSlide17
ESTIMATING ADJUSTMENTS BY DEPRECIATED COSTDifferenceSubject has 440 SF garageComparable sale has no garage
Unit cost new is estimated at $33.50/SFCost New of GarageSize 440 SF @ $33.50 per SFTotal replacement cost
440 SF X $33.50 per SF = $14,47017Slide18
ESTIMATING ADJUSTMENTS BY DEPRECIATED COSTDepreciationAge of subject garage = 29 yrs
Economic life = 100 yrs% depreciation = 29/100 = 29%Amount of depreciation is 29% of $14,470 or $4,275Adjustment Amount
Cost new $14,470Less: Depreciation - $4,275Equals: Amt. of adjust rounded $10,00018Slide19
ADJUSTING FOR SALE TERMS OR CONDITIONS19Slide20
Using Linear Regression to Analyze Sales20
Figure 9.8Slide21
AUTOMATED VALUATION MODELSComputer Software ProgramAnalyzes data in specified area or neighborhoodRelates 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
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ARRIVING AT AN INDICATED VALUE22Slide23
ARRIVING AT AN INDICATED VALUEReview the Entire ApproachComparabilityActivity levels
Adjustment accuracyStatistical limitsLagging the marketMotivation
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ARRIVING AT AN INDICATED VALUEReview the Sales DataSales dataAdjustments
Estimate Value RangeValue range shown by comparableUpper and lower limitsSelect a Final Value
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SUMMARY25
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.