03-03-1996 WS - Laserfiche WebLink

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ADJUSTMENT ANALYSIS . The Sales Comparison Approach requires adjusting and analyzing comparables to derive a value estimate for the subject. The various sale prices are adjusted after identifying relevant adjustment factors and after quantifying the effect of a difference between the comparables and subject. Before any adjustment can be identified or quantified, a sale must be considered sufficiently comparable to the subject property. Even if the sale is considered sufficiently comparable, a determination must be made as to the adequacy of the data collected. The difficulty in quantifying adjustments is a result of real estate being unique in nature, with no two properties being identical. Additionally, not all differences require an adjustment. This is true if the market does not pay a premium or lower the price for a difference between similar properties. The Appraiser typically will have to rely on reason and experience to decide which differences should be adjusted, as well as the magnitude of any adjustment. The most appropriate use for an adjustment grid and pairing sales for specific dollar or percentage adjustments is for simple properties where relatively few adjustments explain differences in value. Vacant land, simple retail, some industrial, and residential properties fall into this category. Another consideration in the sales comparison approach is that adjustments can be overlapping. Overlapping adjustments are those that look like independent adjustments, but may in fact be reflecting the same market consideration for differences in price. For example, adjustments for • utility, location, zoning, and traffic count may be overlapping and may all be included in the market perception of location. If various location factors such as traffic count or zoning are delineated for adjustment, the appraiser should consider the specific effect of each factor on value. The adjustment process is an attempt to account for significant adjustment factors between the comparables and the subject property. The comparables are adjusted to the subject property for their dissimilar features. Therefore, if the comparable has a feature that is better than that found in the subject property, a downward adjustment is applied. If, on the other hand, the feature is worse than in the subject, or non-existent in the comparable, an upward adjustment is applied. The physical differences and/or characteristics that exist between the comparables and the subject are adjusted to indicate a reasonable value conclusion for the property being appraised. 1. Real properly rights conveyed - The real property rights conveyed is the first adjustment because the appraisal of the subject property rights can only be compared to similar property rights. If no information can be obtained to extract an adjustment of, for example, a fee simple interest to a leased fee interest or leased fee to fee simple, then the sale should not be used. In practice, a sale of a fee simple interest is typically not compared to a leased fee or leasehold estate. Typically, comparability required omitting sales of different property interests. It can be seen that this is a major reason why this is the first consideration. All comparable sales are of fee simple interests, so no adjustments are necessary. 11111 -45-