The Student Handbook toTHE APPRAISAL OF REAL ESTATE

1

Chapter 14

Comparative Analysis

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 2

Quantitative Adjustments

Data analysis techniques Paired data analysis – Sales with and without a

feature Statistical analysis – Many sales with and without

a feature Graphic analysis – Many sales presented in a

graphic presentation

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 3

Agricultural Land Sales

Sale Price Acres Price per acre

1 $400,000 70 $5,714

2 $500,000 90 $5,556

3 $550,000 103 $5,340

4 $600,000 110 $5,455

5 $700,000 135 $5,185

6 $775,000 150 $5,167

7 $805,233 155 $5,195

8 $896,543 175 $5,123

9 $985,700 195 $5,055

10 $1,000,000 200 $5,000

11 $1,256,500 230 $5,463

12 $1,125,890 250 $4,504

13 $1,258,900 285 $4,417

14 $1,358,000 310 $4,381

15 $1,580,000 366 $4,317

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 4

Price per Acre

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

70 90 103 110 135 150 155 175 195 200 230 250 285 310 366

Numbers of Acres

Price Per Acre

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 5

Quantitative Adjustments, continued

Cost analysis – Depreciated cost can be used to support adjustment rates in the sales comparison approach.

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 6

Quantitative Adjustments, continued

Capitalization of income differences Gross rent multipliers Direct capitalization of a single year’s income

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 7

Qualitative Analysis

Trend analysis Relative comparative analysis

Narrative discussion of issues, usually just listing the data

Discussion of what is inferior and what is superior

Ranking analysis

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 8

Ranking Analysis

Address Bdr. Bath F/H Legal Acre Garage Lvls. Bsmt.Fin.

Bsmt. GLA sq. ft. $ Price $/sq. ft.1 773 Coventry Way 5 2/1 Brookshire  0.35 3 - car att. 2 Y Y 2,540 245,000 $962 2429 Windsor Drive 4 2/2 Brookshire  0.38 3 - car att. 2 Y Y 2,584 242,500 $943 2795 Brookshire Parkway 4 3/2 Brookshire  0.35 2 - car att. 2 Y Y 2,254 234,900 $1044 2207 Windsor Drive 4 2/1 Brookshire  0.35 3 - car att. 2 Y N 2,677 220,000 $825 888 DuchessDrive 4 3/2 Brookshire  0.38 2 - car att. 2 Y N 2,268 217,500 $96

6 890 Windsor Drive 3 2/1 Brookshire  0.30 2 - car att. 2 Y N 2,612 200,000 $777 895 Brookshire Court 4 3/2 Brookshire  0.25 2 - car att. 2 N N 2,429 191,000 $798 795 Kent Parkway 4 2/1 Brookshire  0.28 2 - car att. 2 N N 2,156 179,900 $839 795 Hampshire Drive 2 2/1 Brookshire  0.23 2 - car att. 1 N N 2,122 178,000 $8410 695 Brookshire Parkway 3 2/1 Brookshire  0.22 2 - car att. 1 N N 1,822 170,000 $9311 555 Brookshire Parkway 3 3/2 Brookshire  0.21 2 - car att. 1 N N 2,016 167,500 $83

- Subject 4 2/1 Brookshire  2 - car att. 2 Y N 2,400 n/a

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 9

Elements of Comparison

Transactional adjustments Real property rights conveyed

Life estates Leased fee, leasehold, subleasehold Mineral rights

Financing terms Low interest rate mortgage assumptions Conditional sales contracts Purchase-money mortgages Seller-paid concessions

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 10

Sequence of Adjustments

$100,000$100,000 + 10% = +$10,000Adjustment 1$100,000 - 10% = -$10,000Adjustment 2$100,000 + 10% = +$10,000Adjustment 3$100,000 - 10% = -$10,000Adjustment 4

$100,000

$100,000 x 110% = $110,000Adjustment 1$110,000 x 90% = $99,000Adjustment 2$99,000 x 110% = $108,900Adjustment 3

$108,900 x 90% = $98,010Adjustment 4

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 11

Elements of Comparison, continued

Conditions of sale Motivated sellers Motivated buyers Related parties Sales of adjacent properties Sales with only one buyer or only one seller

Expenditures made immediately after purchase The sale price of the property plus the new roof

or new HVAC system The sale price plus the cost of demolition of the

building

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 12

Elements of Comparison, continued

Market conditions adjustments Compensate for changes in the market from the

date of sale to the effective date of appraisal Make the value opinion equal to the effective

date. Analyze sales and re-sales of the same properties

Property adjustments Location

Compensate for differences in the locational attributes of the subject property and the comparables

Adjustment can be based on land values

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 13

Elements of Comparison, continued

Physical characteristics Size of site and building Condition, quality, and age of improvements Property amenities Functional utility

Economic characteristics More or less rent More or less expenses

Use/zoning Non-realty components of value

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 14

Problems

Suggested solutions begin on page 422.

Student Handbook to THE APPRAISAL OF REAL ESTATEChapter 14 15

Problems 11 and 12—Suggested Solutions

Problem 11Sale Price Frontage Depth GBA Sq. Ft. $/Front Ft. $/Sq. Ft. Land$/Sq. Ft./GBA

1 1,597,530$ 335 489 45,000 $4,768.75 $9.75 $35.502 1,358,987$ 300 410 38,500 $4,529.96 $11.05 $35.303 1,258,963$ 400 400 35,000 $3,147.41 $7.87 $35.974 1,112,598$ 245 333 32,000 $4,541.22 $13.64 $34.775 1,000,000$ 275 405 29,000 $3,636.36 $8.98 $34.486 987,654$ 370 415 28,700 $2,669.34 $6.43 $34.41

Subject -$ 444 455 28,000 Average 35.00$

28,000 x 35.00$ = 980,000$

Problem 12Sale Price Frontage Depth GBA Sq. Ft. $/Front Ft. $/Sq. Ft. Land$/Sq. Ft./GBA

1 125,987$ 200 246 15,000 $629.94 $2.56 $8.402 135,897$ 210 250 18,000 $647.13 $2.59 $7.553 145,800$ 200 285 22,000 $729.00 $2.56 $6.634 99,000$ 195 200 20,000 $507.69 $2.54 $4.955 128,589$ 200 255 24,500 $642.95 $2.52 $5.256 175,000$ 200 339 25,000 $875.00 $2.58 $7.00

Subject -$ 200 275 18,000 Mean averages 671.95$ 2.56$ 6.63$ Std. deviation 122.22$ 0.03$ 1.33$ % std deviation 18.19% 0.99% 20.06%