Sales Comparison

Approach
Analysis of Market Data

Wayne Foss, MBA, MAI, CRE

Foss Consulting Group
Email: wfoss@fossconsult.com

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
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The Six Steps

4. Select relevant Units-ofComparison
5. Compare market observations to
the appraised subject property
6. Reconcile the various value
indications to a final value estimate
by this approach
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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.
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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

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

Sequence of Adjustments,
cont
General Sequence of Adjustments
Second:
Location
Physical Characteristics
Other Characteristics, e.g., zoning, access, view,
income producing characteristics

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.

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:
Element
Date of Sale
Price
Size (Sq. Ft.)
Age (years)
Condition
Change in Price

Sale 1
Sale 2
Sale 3
Sale 4
Current
3 Months 6 Months
1 Year
$ 550,000 $ 535,000 $ 520,000 $ 490,000
1,200
1,200
1,200
1,200
45
45
45
45
Good
Good
Good
Good
Base

2.8%

5.8%

12.2%

Physical Characteristics
Analysis of Contributory Value of Expansion
Space (Size)
Element
Sale 1
Sale 5
Sale 6
Sale 7
Date of Sale
Current
3 Months 6 Months
1 Year
Price
$ 550,000 $ 542,000 $ 517,000 $ 496,500
Adjust for Market Conditions
$ 16,260 $ 31,020 $ 59,580
Sub-total
$ 550,000 $ 558,260 $ 548,020 $ 556,080
Size (Sq. Ft.)
1,200
1,400
1,150
1,350
Age (years)
45
45
45
45
Condition
Good
Good
Good
Good
Diff in Size
Diff in Adj. Price
Price/Sq. Ft.

Base
Base

200
$ 8,260
$ 41.30

(50)
150
$ (1,980) $ 6,080
$ 39.60 $ 40.53

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Physical Characteristics
Analysis of Contributory Value of an
Amenity (Condition, Patio Cover, View, etc.)
Element
Sale 8
Sale 2
Sale 9
Sale 4
Date of Sale
Current
3 Months 6 Months
1 Year
Price
$ 535,000 $ 535,000 $ 490,000 $ 490,000
Adjust for Market Conditions
$ 16,050 $ 29,400 $ 58,800
Sub-total
$ 535,000 $ 551,050 $ 519,400 $ 548,800
Size (Sq. Ft.)
1,200
1,200
1,200
1,200
Age (years)
45
45
45
45
Condition
Average
Good
Fair
Good
Difference in Price
For Condition
Conclusion:

Base

$ 16,050
$ 15,000

$ 15,600

$ 13,800

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Sales Comparison
Approach - Conclusion
Element
Subject
Date of Sale
Current
Price
Adjust for Market Conditions
Sub-total
Size (Sq. Ft.)
Adjustment
Age (years)
Condition
Adjustment
Subtotal Adjustments
Indicated Value

1,300
45
Average

Sale 1
Sale 5
Sale 9
Sale 10
Current
3 Months 6 Months
1 Year
$ 550,000 $ 542,000 $ 490,000 $ 485,000
$ 16,260
$ 550,000 $ 558,260
1,200
1,400
$ 4,000 $ (4,000)
45
45
Good
Good
$ (15,000) $ (15,000)
(11,000)
(19,000)
$ 539,000 $ 539,260

$ 29,400
$ 519,400
1,150
$ 6,000
45
Fair
$ 15,000
21,000
$ 540,400

$ 58,200
$ 543,200
1,350
$ (2,000)
45
Average
(2,000)
$ 541,200

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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

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So Thats
Abstraction of Adjustments

Wayne Foss, MBA, MAI, CRE, Fullerton, CA USA

Email: wfoss@fossconsult.com

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