How does an appraiser identify properties when using the sales comparison approach quizlet?

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• How do you do a sales comparison approach?
• What is the number one rule of adjusting properties when using the sales comparison approach?
• When you're using the sales comparison approach to value a property?
• What are the steps in the sales comparison approach to estimating value quizlet?

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Select the most relevant units of comparison

Consider any relevant units; price per unit, per bedroom, per square foot or per acre, per front foot, per net rentable area etc.

The goal is to define and identify a unit of comparison that explains market behavior

The applicable unit of comparison tends to be property type specific and inherently adjusts for building of property size

Offices - per square foot Retail - per square foot Hotels - per room

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Here's yet another example of paired data analysis. We are going to use this technique to extract an adjustment for changes in market conditions.

Example 3, Sale and Resale:

A home sells in January for $180,000 and sells again in November for $198,000. When the home resold, it had not been improved at all from the date it was originally purchased. The only change was the time. What is the indicated adjustment for time or change in market conditions?

$198,000 / $180,000 = 1.10

That is an increase of 10.0% over 10 months, or an average of 1.0% (one percent) per month. Therefore, if a comparable property sold 12 months ago, we could adjust it on the basis of 1.0% per month or a total of 12%.

That is the way most residential appraisers make adjustments for changes in market conditions; using straight-line adjustments, on a monthly basis. An alternative method is to use compound interest, instead of straight-line, for the monthly adjustments. Let's look at an example using the Hewlett Packard 12C calculator.

The HP 12C employs five financial function keys. They are arrayed across the top of the calculator and include:

n = number of periods

i = periodic interest rate

PV = present value

PMT = periodic payment

FV = future value

To clear all the financial registers, press f CLEAR FIN. You should train yourself to do that whenever you start to solve a new problem. It will clear all the information that is stored in all five financial registers.

Information can be added into the five keys in any order.

To solve a problem, you need to know any three items. Then you can solve for the fourth item (unknown). In some problems, you need to know four items and then solve for the fifth.

The keystrokes would be:

f FIN (to clear the financial registers)

180000 PV

198000 CHS FV (one of the numbers has to be a negative number)

10 n

i

The answer is .96 - instead of the 1.0 (1% per month) we derived in the straight-line calculation. .96 X 12 months is a total adjustment of 11.49%. $180,000 X .1149 = $20,682. The result from the straight-line calculation would be $180,000 X .12 = $21,600. The results differ by $21,600 - $20,682 = $918.

An adjustment could be made on either basis, but we would hope to find additional market evidence for support. We said earlier that one sale does not make a market, and it is also true that in real life, one pair of sales should not be the sole support for an adjustment. We should check this indicated adjustment against other evidence of trends in the market area.

For purposes of this course, however, we will often use a single pair of sales to extract an adjustment.

How do you do a sales comparison approach?

The Steps in the Sales Comparison Approach are:.

Find recent sales of similar houses in the subject's market area..

Verify data regarding comparables..

Compare each sale with the subject to determine the differences..

Make adjustments to determine the dollar differences..

Derive an indicated value after making adjustments..

What is the number one rule of adjusting properties when using the sales comparison approach?

In order to ensure a realistic sales price, the comparison properties must be in line with the property that is going to be listing. This means that things like the number of bedrooms, bathrooms, lot size, and square footage of the home should be similar.

When you're using the sales comparison approach to value a property?

The term sales comparison approach refers to a real estate appraisal method that compares one property to comparables or other recently sold properties in the area with similar characteristics. Real estate agents and appraisers may use the sales comparison approach when evaluating properties to sell.

What are the steps in the sales comparison approach to estimating value quizlet?

Terms in this set (15).

Research the market. ... .

Verify the information. ... .

Select relevant units of comparison. ... .

Compare comparable sale properties. ... .

Reconcile the various value indications..

What is the sales comparison approach quizlet?

What are the steps in the sales comparison approach?

What's the first step an appraiser takes when using the sales comparison approach?

When you're using the sales comparison approach to value a property?