# analyzing and adjusting comparable sales

```Chapter 9
CHAPTER TERMS AND CONCEPTS
Automated valuation model
Matched pair
(AVM)
Multiple regression
Comparison process
Date of sale
Physical elements
Depreciated cost method
Physical unit of comparison
Direct comparison method
Economic unit of comparison
Sales graph
Elements of comparison method
Terms and conditions of sale
Gross income multiplier (GIM)
Total property comparison
Linear regression
Unit of comparison
Location elements
Value range
2
LEARNING OUTCOMES
1. Name the four elements of sales
comparison.
2. List the three
rules
for
making
3. Name the three types of adjustments
most commonly used.
4. Explain how a value conclusion is
reached.
Which is more attractive to buyers?
ELEMENTS OF COMPARISON
Terms and Conditions of Sale
Time of Sale
Location
Physical Features
Elements of Comparison
PRICE VS. TERMS OF SALE
• Seller Financing

Better or worse than Standard?
• Assumed Financing

Better terms?
• Seller-Paid Points


In a Buyer’s market, Seller may pay points
• Identify and Compare Sales
Characteristics
are:



Reasonable
Are consistent among the sales
Explain the price differences between the
sales &amp; subject
 Adjust the Sale to the Subject




Terms/conditions
Time
Location
Physical features
•
Lump Sum Dollar
•
Percentage
•
Units of Comparison
Figure 9-2
URAR FORM ANALYSIS GRID
Figure 9-4
12
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
GRAPHING THE SALES
14
USING MATCHED PAIRS
Adjusting Sales with the Direct Market
Method
 Subject: 2,600 SF living area
 Sales: Similar, except different in size
 Adjustment: Search for sales differing only in size
USING MATCHED PAIRS
 Evidence
o
2,500 SF
o
2,700 SF
 Calculation:
o
Sale
Size
Price
o
B=
2,700 SF
\$280K
o
A=
2,500 SF
\$270K
o
Difference
200 SF
\$10 K
\$10,000&divide;200 SF
= \$50 SF Change
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
o
440 SF X \$33.50 per SF =
\$14,470
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
 Cost new
 Less: Depreciation
\$14,470
- \$4,275
 Equals: Amt. of adjust rounded
\$10,000
ADJUSTING FOR SALE TERMS OR CONDITIONS
Using Linear Regression to Analyze Sales
Figure 9.8
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
ARRIVING AT AN INDICATED VALUE
ARRIVING AT AN INDICATED VALUE
Review the Entire Approach
 Comparability
 Activity levels
 Statistical limits
 Lagging the market
 Motivation
ARRIVING AT AN INDICATED VALUE
Review the Sales Data
 Sales data
Estimate Value Range
 Value range shown by comparable
 Upper and lower limits
Select a Final Value
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.
```