1. Sales Comparison Approach Analysis of Market Data Wayne Foss, MBA, MAI, CRE Foss Consulting Group Email: wfoss@fossconsult.com

2. 2 The Six Steps An Overview; then the details  1. Know the Subject and the Appraisal Problem to be solved  2. Market Research find and confirm comparable sales of similar buyer appeal, use, potential.  3. Verify and confirm market information  Buyer, Seller, broker; someone with firsthand knowledge of the transaction

3. 3 The Six Steps  4. Select relevant Units-of- Comparison  5. Compare market observations to the appraised subject property  6. Reconcile the various value indications to a final value estimate by this approach

4. 4 Sales Comparison Adjustments Key: The underlying idea is to “adjust” the sales price of the comparable answering the question: --What would the comparable sale property have sold for IF it had the characteristic(s) of the subject? That best indicates subject value.

5. 5 Making Comparison Adjustments Remember, adjustments are made to the price of the comparable:  adjust UP when the subject is SUPERIOR;  adjust DOWN when the subject is INFERIOR to the comparable property

6. 6 Sequence of Adjustments  General Sequence of Adjustments  First:  Property Rights  Financing (cash equivalency)  Conditions of Sale (motivation/concessions)  Market Conditions (time)

7. 7 Sequence of Adjustments, con’t  General Sequence of Adjustments  Second:  Location  Physical Characteristics  Other Characteristics, e.g., zoning, access, view, income producing characteristics

8. 8 Paired Data Analysis  Allows the analyst to derive the contributory value of a component directly from market data  Compare two sales that are otherwise similar except for one characteristic  Examples of differences would be:  Date of Sale (market conditions)  Size (living area)  Condition  Etc.

9. 9 Market Conditions  Research Sales that –  Have sold twice (or more) in the recent past  Multiple sales that are otherwise similar other than date of sale  For Example:

10. 10 Physical Characteristics  Analysis of Contributory Value of Expansion Space (Size)

11. 11 Physical Characteristics  Analysis of Contributory Value of an Amenity (Condition, Patio Cover, View, etc.)

12. 12 Sales Comparison Approach - Conclusion

13. 13 Limitations to Paired Sales Analysis  Perfect sets of data are rarely found  Statistical Analysis is not appropriate for small sample sizes generally available to an individual assignment  Judgment is required

14. 14 So That’s Abstraction of Adjustments Wayne Foss, MBA, MAI, CRE, Fullerton, CA USA Email: wfoss@fossconsult.com