real estate finance - full book (500 pgs)

Due to the complexity of the method its use is rarely

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Unformatted text preview: on and financing terms), and time from date of sale. After going through this process for each of the comparable properties, the appraiser assigns a value to the subject property that is the adjusted sales price of the comparable(s) most like the subject. The two keys to effective use of the sales comparison approach are: Identifying similar properties that are truly “comparable” to the subject property, and 12-4 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 12: QUALIFYING THE PROPERTY Making the proper adjustments to the sales prices of the comparable properties to account for any differences between the subject property and the comparables. It is relatively rare, however, to find two properties that are so comparable that there is no difference in their values. For this reason, the adjustment process is central to the sales comparison approach. In the adjustment process, the sales price of the comparable property is adjusted (up or down) to reflect aspects of the comparable property that are viewed as less valuable or more valuable in comparison to the subject property Example: House A, which sold for $55,000, is comparable to house B, the subject property, but has a garage valued at $5,000. House B has no garage. In this case, using the formula for the sales comparison approach, the market value of the subject property would be reached as shown below. $55,000 – $5,000 = $50,000 House B is valued at $50,000. Example: House X, the subject property, is 15 years old. A comparable property, house Y, is 15 years old and sold for $70,000 one year prior to this appraisal. Because of changes in market conditions since the sale of house Y, the appraiser has determined that 10 percent added to the sales price is an accurate reflection of the increase in property values over the year. In this case, using the formula for the sales comparison approach: Value of Subject Property = $70,000 + (10% x $70,000) = $77,000 House X is valued at $77,000. COST APPROACH In the cost approach, the cost of property improvements, le...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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