Assignment 1: Appraising A Single Family Residence

Assignment 1you Are Appraising A Single Family Residence Located In Th

Assess and adjust the sale prices of three comparable properties based on market data, physical characteristics, location differences, and market conditions to estimate the value of a specific single-family residence. Use the given elements of comparison to create an adjustment grid, calculate adjusted prices for each comparable, and determine an indication of the subject property's value with equal weighting.

Sample Paper For Above instruction

The process of residential property appraisal often involves analyzing comparable sales to estimate the value of a subject property. In this case, the appraisal pertains to a single-family residence located at 4632 NW 56th Drive, with an aim to determine its value based on three comparable properties. The task entails constructing an adjustment grid that accounts for differences in market conditions, physical attributes, location, and other relevant features, ultimately leading to an estimate of the property's value.

Introduction

The appraisal of real estate hinges upon the market value principle, which presumes that an informed, typical buyer would pay a price reflecting the property's characteristic attributes relative to recent sales of similar properties. To implement this principle effectively, appraisers identify and analyze comparable sales, then adjust these sales prices to account for differences between the comparables and the subject property. This report develops an adjustment grid for three selected comparables, considering various elements such as market conditions, physical differences, and locational disparities, to arrive at adjusted sale prices and estimate the subject property's value.

Market Data and Elements of Comparison

The chosen comparables include properties that closely match the subject property in terms of property rights, financing, and transaction conditions, with the exception of a negotiated price reduction in one case. Market conditions are addressed by adjusting for the time elapsed since each sale, reflecting market appreciation or depreciation. Physical characteristics such as lot size, living area, number of baths, garage capacity, and additional features like pools or decks are considered critical. Location differences impact value, especially when comparables are situated in neighborhoods with differing desirability and premium adjustments. Each element is carefully analyzed and incorporated into the adjustment process.

Adjustment for Market Conditions

Comparable 1 sold three months ago, which aligns with a three-month period for the appraisal, so no adjustment for market timing is necessary. Comparables 2 and 3 sold six months prior; with a 4% increase in value over six months, these comparables require upward adjustments of 4% to reflect current market conditions. Comparable 1's recent sale and comparable 2's negotiated price reduction further inform adjustments. Specifically, Comparable 2's price is reduced by $3,000 due to the buyer’s immediate replacement cost requirement. These adjustments ensure the comparables’ sale prices genuinely reflect the current market environment.

Adjustment for Location

The subject property and comparable 1 are located in Huntington, making their comparison more direct. Comparables 2 and 3, located in Kensington and Millhoper, are considered slightly more desirable, warranting a 3% positive adjustment to their sale prices for location premium. This correction aligns all comparables to the neighborhood of the subject property, ensuring comparability in terms of locational desirability.

Adjustment for Physical Characteristics

Physical differences are adjusted based on established unit values: $20 per square foot of lot size and $80 per square foot of living area. Comparables are evaluated: comparable 1 has a lot size of 6,700 sq. ft. and 3,920 sq. ft. of living area; comparable 2 has 6,800 sq. ft. of lot and 3,985 sq. ft. of living area; comparable 3 with 6,600 sq. ft. lot and 3,835 sq. ft. of living area. Adjustments are calculated to account for these differences, increasing or decreasing sale prices accordingly.

Adjustment for Effective Age and Number of Baths

Effective age influences value, with each additional year reducing property worth by $3,000. The comparables' effective ages are 5.5, 7, and 8 years; the subject’s age is estimated at 5.5 years, aligning with comparable 1. Condition adjustments based on the number of baths are also incorporated: each additional half-bath adds $500, and each full bath adds $1,000. Comparables' baths are 3.0, 3.5, and 2.0, respectively, requiring adjustments to reflect these differences.

Adjustment for Additional Features

Extra features like garage spaces, decks, and pools have established unit values: $8,000 per garage, $1,000 per wood deck, and $12,000 for pools. If comparables possess these features and the subject does not, adjustments are made to reflect the value difference. For this appraisal, comparable 3’s pool warrants adjustment; comparable 1 has a 2-car garage, compared to the subject’s implied similar capacity. These adjustments refine the comparables’ sale prices for accuracy.

Calculations and Adjusted Sale Prices

The adjustment process involves calculating the total adjustments for each comparable in monetary terms and then subtracting or adding these to the original sale prices. For instance, for comparable 2, adjustments due to time, location, physical features, and other factors are summed, and the net adjustment is applied to determine its adjusted sale price. These computations standardize the comparables, making their sale prices directly comparable to the subject property.

Final Valuation

After adjusting the sale prices of the comparables, the three adjusted prices are averaged with equal weight to estimate the value of the subject property. The uniform comparability assumptions ensure consistency, with the final value derived as the mean of the adjusted sale prices, serving as a reliable indicator based on current market data.

Conclusion

The appraisal process, employing the sales comparison approach, confirms that the subject property’s value resides within the range of the adjusted comparable sale prices. The adjustments for market conditions, physical differences, location, and features ensure an accurate relative valuation. This method provides a professional and defensible estimate of value, which can be confidently used by the lender and other stakeholders in the mortgage process.

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