03-03-1996 WS - Laserfiche WebLink

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• • Financing -A financing adjustment is actually a specific motivation adjustment and often is not capable of being accurately derived from a mathematical discounting process. The most reliable financing adjustment is from paired sales, but such detailed data is generally not available from sales information. In practice, the parties in a transaction should be consulted concerning the effects of financing and this should be compared to a mathematically derived indication by discounting the payments specified by the transaction at the market rate of interest. The most commonly used market value definition requires appraising to "cash, with typical institutional financing or other stated terms". Furthermore, if the subject is assumed to have other than typical institutional terms, the terms and the effects of the financing on the appraised value should be set forth in the report. The comparables are purchased on a cash equivalent or cash basis, and therefore no adjustment is necessary. 3. Conditions of sale (motivation) - Similar to property rights conveyed, a motivation other than that assumed in the value definition may require discarding a sale from consideration. For example, if a sale were affected by undue duress, then no appropriate adjustment could probably be derived. However, an adjustment for plottage, purchasing additional land for expansion or parking, and other typically motivated sales may have an adjustment that may be inferred from the market by comparison or from information provided by the buyer or seller. The comparable land sales were confirmed to be an arm's length conditions of sale. Therefore, no adjustment was mmade coon and have typical 4. Market conditions (time) - A time adjustment is a market conditions adjustment because it is changes in the marketplace, and not the passage of time, that causes prices to change (the principle of change). Time adjustments may be straight-line (noncompounded) or compound (curvilinear). Neither method is more appropriate than the other as long as market changes are accurately adjusted, and as long as the procedure used is consistent with the method used when a time adjustment was abstracted and with the mariner in which it was applied. Because of the varying nature of the real estate industry in the area, as well as the Twin Cities Metropolitan Area, we have applied a 3% adjustments per year in the analysis of the comparable land transactions. 5. Location- The location of each sale has been reviewed and compared to the subject in terms of access, visibility, identity, proximity to support services and market area. Tracts of similar highest and best use should be compared. Generally, it is inappropriate to use sales of different highest and best use with an attempt to adjust the differences for location. For example, it would be better to obtain sales of the same highest and best use from a larger area and adjust for differences in location, than to obtain sales of properties that are closer to the subject but have a different highest and best use. All the comparable sales were considered to have a similar 1111 -46-