Exam 2 Flashcards
What are the Quantitative Adjustments?
Data Analysis, Statistical, Graphic, Cost and Capitalization of Income differences
What are Qualitative Adjustments?
Relative Comparison Analysis, Ranking Analysis and Trend Analysis
what is Graphic Analysis?
Quantitative Adjustment, $ per acre and # acres. Look for Trend line after plot the data
Reconciling Value Indicators
Quantity is not as important as quality of comps. Bad info in will bring bad info out. Need to find a reliable data source.
Cost analysis
Quantitative Adjustments Depreciation of properties. Cost - loss in depreciation = value. Can be physical, functional and/or external depreciation.
Statistical Data
Quantitative adjustments, There are many sales with or without features. Take sample data and make a regression graph. Find M and Median. Find value of extra room. Caution because outlier can mess with means. volatility of prices
Relative Analysis Comparison
Superior, equal, inferior. Listing comps in order of quality to subject property. Qualitative
Data Analysis Techniques
Quantitative adjustments, paired data or matched pairs. Two comps same accept one thing. The extra thing accounts for price difference. tough because location can never be the same. Sales with or without feature. Secondary data from 3rd party.
Capitalization of income Differences
Quantitative Adjustments, Gross rent multiplier = sales price/ gross rent. Direct cap rate of single years income= noit+1/noit. Caution: make sure GRM is same as comps and subject
What is Comparative Analysis?
Comparing Comps to find an adjusted value. Uses quantitative and qualitative
Property Adjustments
Location, physical ( size, conditions, quality, age, amenity). Economic (rent), legal (zoning), Non realty components of value( personal property)
Step 3 Transactional Adjustments
Condition of Sale, was buyer or seller in duress? Ex: arms length as normal sale
Cascading Errors and Inbreeding Data
Bad input= bad output, one bad outlier will skew result so dig to find reliable data. All 3 approaches should not use same data because that would not mean independence.
Step 3 of Procedure of Sale Comps
Make sure unit of data matches. Gross Living Area or gross building area or price per sf. Pick the best data set for the subject property.
Step 1 of Procedure of sales comps
Market Research. Lost of data and transactions. Sales, listings, pending sales, offerings. Use MLS, Costar RCA. Bad data ruins research. Dig to find good ones.
Step 4 procedure sales comp
Analyze and Adjustments comps. Identify and measure of adjusting. Look for similarities. Make sure transational is in order
Trend Analysis
Plot data and find trend line in the prices. Offshoot of statics and graphical analysis. Qualitative Adjustment.
Procedure of sales Comparison Approach
- Market Research
- verify info per Scope of work
- select relevant Unit of comparison
- Analyze and adjustments
- Reconcile value conclusions
Step 5 Procedure of Sales comp
Reconcile value conclusion. Is it range or a point. Adjust sales price on comps
Step 2 Procedure sales comp
Verify info per scope of work. was it arms transactions, with cash equivalent terms. Adjust for market value and cash equivalent terms
Step 2 Transational adjustments
Financing of property. Pay more for good terms. Market value = cash equivalent sale price
What is the relation to appraisal principles?
Supply and Demand: 1st sign of non equilibrium. See cycle of RE
Substitution: basis of sales comp. Buy lower option even if same quality
Balance: if over supply, price will drop. Will builds stop construction, no they need paycheck
Externalization: Positive and negative
Market value and Highest and best use
Step 5 of Transaction Adjustment
Market Conditions. Time adjustment for up or down market.
Does double SF mean double cost?
No the area will double but the perimeter will not. The building supplies for the walls will not be the same.
How many comps do we need?
There is no set number needed for comps. the more the better. They need to be quality comps. Residential ask for 3 but you do not need to do that many.
What does Historical Approach mean?
Use old data to determine value of subject property. Easy to understand. Direct reflection of market. Good data in means good data out.
Order of Transational Adjustments
- Property Rights conveyance
- Financing
- Condition of sale
- Property fixes immediately after sale
- Market Conditions
Step 4 of Transational adjustments
expenditures after sale. new roof, pain etc. Pay less for house because you spend money right after you bought. Adjustment to gross sale price
Step 1 of transational adjustments
Property rights conveyed. lease fee vs fee simple
Ranking analysis
Putting data into array. Put it is order or price for ex and put subject property into array at best point.
