Section 6 Sales Comparison Flashcards
Sequence of adjustments
Privates First Class Earn Mildly Lower Pay Except in the US Navy - Property RIghts, Financing, Conditions of Sale, Expenditures after purchase, Market conditions, location, Physical, Economic, Use/Zoning, Non Reatly
What is the property rights adjustment if the subject has a deficit rent that reduces its value by 2% and the comp has excess rent that increases its value by 3%
.98/1.03 = .9515 95.15%
What type of rate is used to discount excess rent?
a rate higher than the yield rate
Property rights adjustment - how do you calculate the adjustment when the subject has excess or deficit rent?
Sale price of comps leased fee
/ .95 (for 5% below market) or .105 (for 5% above market)
= adj sale price for each comp
less adjustment for subjects property rights
7 situations that may warrant a financing adjustment
Below market seller financing, sale price deferred as a tax avoidance device, loan assumption, buyer assumes special assessment, seller procures loan buydown, buyer pays all cash to close quickly, purchase subject to zoning change w/ delayed closing
4 ways to quantify a financing adjustment
Paired data, discounting to yield, flat discounts, ask participants
Discounting to Yield method
Grid w/ calculator on top, PMT, balloon, PV & Spread on the side. Calc the payment, switch to the balloon, calc the FV, switch the i and calc for PV - that’s the present value of the loan and the spread is the difference between the 2 PVs
What’s the disadvantage of the Discounting to Yield method?
it overstates the worth of the financing
Equity Yield Model
Grid w/ calculator on top Market, Ballon, Contract, Balloon on the side. calc the payment if market terms, change the n for the balloon calc the FV change the n & i to reflect the contract terms and calc the payment then change the i to reflect the balloon. Then put in the difference in payment and the difference in FV and use the equity yield rate to calculate the PV or amount overpaid.
6 situations that may warrant a conditions of sale adjustment
sale between family members, seller paid buyers points, seller paid buyers closing costs, assemblage, price is lowered to sell quickly, buyer or seller not well informed
Expenditures post sale adjustment
atypical expenditures that a buyer knew about during negotiations, always upward, Razing Costs or other know expenditure negotiated w/ the deal. Cost + incentive
Market conditions adjustment
due to PIE - price, income, employment. The cost or availability of debt capital, consumer attitudes and practices
5 situations that warrant a market conditions adjustment
contract sale (land contract, delay in closing), option price, delayed closing, contingent sale, build to suit, change in conditions due actual changes not just time/CPI
Economic adjustments
micro economic comparision of 2 properties. Examples differences in operating expenses, management, tenant mix, rent concessions, lease expirations, renewal options, expense recovery clauses
If two properties are located in different Cities with different real estate taxes is the adjustment Economic
no its locational. If two properties in the same city had different % tax burdens, that would be economic.
