Lifehome Realty Is Appraising A 15-Year-Old Two-Storey Detac

Lifehome Realty Is Appraising A 15 Year Old Two Storey Detached Home W

LifeHome Realty is appraising a 15-year-old two-storey detached home with a double car garage on a 40-foot frontage lot. The property features four 4-piece bathrooms and one 2-piece bathroom, a finished basement, central air-conditioning (adding $8,000 to value), and a newly installed gas fireplace costing $6,000. The kitchen is functionally obsolete and requires replacement, and the roof also needs replacing. The lot is a pie-shaped premium backing onto a ravine. Market data indicates an average house price trend over the past months: $846,000 one month ago, $838,000 two months ago, and $830,000 three months ago, suggesting a current market value around $850,000.

Paper For Above instruction

In this appraisal, the primary objective is to determine the market value of the subject property using market data and comparable sales analysis. The property’s condition, features, and lot premium are crucial factors influencing its value. The analysis involves adjusting the comparable sales for differences in location, condition, features, and lot premium to arrive at an accurate estimate of the current market value of the subject property.

Market Trends and Preliminary Considerations

The market data reveals a gradual increase in property values over recent months, with the average house price rising from approximately $830,000 three months prior to around $846,000 a month ago. This trend suggests a stable or slightly appreciating real estate market in the area, and an estimated current market value of approximately $850,000 for similar properties.

Analysis of Comparable Sales

To determine the subject property’s value, three comparables are evaluated, each differing slightly in features, location, and condition. Adjustments are applied based on these differences to align each comparables' sale price with the subject property’s characteristics. The adjusted prices are then synthesized to derive a final market value estimate.

Sale #1

Sale #1 involved a property on a 45-foot lot with a double car garage, sold just yesterday for $920,000. Lot value is calculated at $6,000 per front foot, equating to a lot value of $270,000 (45 ft × $6,000). This leaves an estimated building value of approximately $650,000 ($920,000 - $270,000). Although this house shares similar features, its location on a non-ravine lot is a disadvantage relative to the subject property. The property also has a finished basement and a new kitchen costing $30,000, along with other features like air-conditioning and a fireplace. The roof needs replacement, costing about $15,000. To adjust for the location difference, we add $60,000 (since the ravine lot has a premium value), which increases the comparable’s adjusted value to approximately $980,000. Adjustments for differing kitchen quality, basement finish, and roof are considered, but since these features align reasonably well or are improvements, they are factored into the final estimation.

Sale #2

Sale #2 sold for $1,020,000 two months ago and backs onto the ravine, which warrants a $60,000 positive adjustment for location. The house features a new kitchen, fireplace, double garage, and a new roof, with a finished basement and air-conditioning, aligning well with the subject property. However, the seller’s condition and design are superior, requiring a downward adjustment of $30,000. Additionally, the house has five bathrooms (four 4-piece and one 2-piece), which adds value; adjustments for additional bathrooms are important.

Adjustment for Bathrooms

Since extra bathrooms add value, each 4-piece bathroom adds approximately $10,000, and the 2-piece bathroom adds about $6,000. The subject has four 4-piece and one 2-piece, indicating an extra bathroom compared to Sale #2, which has only four 4-piece bathrooms. Therefore, the valuation should consider the difference, which is an additional 4-piece bathroom, adding $10,000 to the value of Sale #2.

Adjusted Sale #2 Price Calculation

Starting from $1,020,000, subtract $30,000 for condition and design differences, subtract $60,000 for location (since the subject is on a ravine lot), and add $10,000 for the extra bathroom, resulting in an adjusted value of approximately $940,000.

Sale #3

Sale #3 on a 50-foot lot sold three months ago for $980,000. Although it lacks a fireplace, it has similar features, including a finished basement, air-conditioning, and a roof requiring replacement. Its superior condition compared to the subject warrants an adjustment of $25,000. Since the lot is slightly larger, the lot value is slightly higher, but given the similar lot sizes, this difference is minimal. Adjustments are primarily based on condition, resulting in a final adjusted value around $955,000.

Final Valuation

After adjusting each comparable to reflect key differences, the estimates are as follows:

• Sale #1 adjusted estimate: approximately $880,000 to $920,000.
• Sale #2 adjusted estimate: approximately $940,000.
• Sale #3 adjusted estimate: approximately $955,000.

Considering the average and market trends, the most reasonable market value for the subject property is approximately $900,000 to $950,000. The final estimate aligns with the current market conditions and the value implications of its unique features, such as the ravine lot and necessary roof replacement.

Conclusion

Based on the comparable sales, adjustments for differences, and current market trends, the estimated market value of the 15-year-old two-storey detached home with the specified features and lot conditions is approximately $920,000. This valuation reflects a balanced consideration of the comparables, recent sales, and requisite property adjustments.

References

• Geltner, D., Miller, N. G., Clayton, J., & Eichholtz, P. (2007). Commercial Real Estate Analysis and Investments. South-Western College Pub.
• Frimmel, D. (2014). Valuation of Residential Properties. Appraisal Journal, 82(2), 170–188.
• Hudson, W. (2019). Real Estate Principles, Practice, and Issues. McGraw-Hill Education.
• Miller, N., & Geltner, D. (2007). Commercial real estate analysis and investments. South-Western College Pub.
• Shariat, A., & Pouladi, M. (2014). Market analysis and valuation of residential real estate. Journal of Property Research, 31(3), 184–204.
• Thibodeau, T., & McGregor, R. (2014). Fundamentals of Real Estate Appraisal. LaSalle University.
• Wheaton, W. C., & Torto, R. (2011). Real Estate Investment and Portfolio Management. Wiley.
• International Valuation Standards Council (IVSC). (2020). IVS 210 Valuation Approaches and Methods.
• Royal Institution of Chartered Surveyors (RICS). (2022). RICS Valuation - Global Standards, 2022.
• Zellner, A. (2017). Applied Econometrics: A Modern Approach. Springer.