13. You are appraising a single-family residence located in the Huntington neighborhood at 4632 NW 56th Drive. The property is being acquired by a mortgage applicant and you have been asked to appraise the property by the lender. Seven potential comparable sales were initially identied. However, three of these seven were highly similar to the subject property in their transactional. physical, and locational characteristics. You therefore decided to exclude the other four transactions from the comparable set. The elements of comparison you used to compare and adjust the sale prices of the comparable properties are listed in the market data grid below. The property rights being conveyed in the acquisition of the subject property are fee simple absolute. Conventional mortgage nancing will be used by the purchaser and the acquisition appears to be an arm's-length transaction. Thus, no adjustments need to be made to the sale prices of the comparable properties for the type of property rights conveyed, nancing terms, or conditions of sale. However, the buyer of comparable 2 was aware that she would have to replace one of the air-conditioning units immediately after acquiring the property (which she did); thus, she was able to negotiate a $3,000 price reduction from the seller. Elements of Comparison Subject Comp Sale 1 Comp Sale 2 Comp Sale 3 Sale price of comparable $510,000 $525,000 $499,000 Transaction characteristics Property rights conveyed Fee simple Same Same Same Financing terms Conventional Same Same Same Conditions of sale Arm's length Same Same Same Expenditures immediately after None $3,000 None purchase Market conditions Today 3 mos. ago: add 2% 6 mos. ago: add 4% 6 mos. ago: add 4% total total total Property characteristics Location Huntington Huntington Kensington Millhoper Physical characteristics: Site/lot size 6,662 sq. ft. 6,700 sq. ft. 6,800 sq. ft. 6,600 sq. ft. Construction quality Typical Typical Typical Typical Condition Average Average Average Average Effective age 5.5 years 7 years 8 years 10 years Living area 3,473 sq. ft. 3,920 sq. ft. 3,985 sq. ft. 3,835 sq. ft. Number of baths 3.0 baths 3.5 baths 3.0 baths 2.0 baths Garage Spaces 2-car 2-car 2-car 1-car Porch, patio, deck Cov. porch/wood Cov. porch Cov. porch Cov. porch deck Fence, pool, etc. None None Pool Pool Economics characteristics NA. NA. NA. NA. Use Single-family Same Same Same Nonrealty components None None None None L Comparable 1 sold three months ago, while comparables 2 and 3 sold six months ago. Based on your knowledge of recent price appreciation in this market, you have decided that comparable 1 would sell for 2 percent more if sold today and that comparables 2 and 3 would sell for 4 percent more if sold today. The subject property is located in Huntington, as is comparable 1. However, comparables 2 and 3 are located in Kensington and Millhoper, respectively. Although Huntington is a high-end neighborhood, both Kensington and Millhoper are generally considered to be slightly more desirable. In fact, homes in these two neighborhoods generally sell for about a 3 percent price premium relative to similar homes in Huntington. In these neighborhoods, an incremental square foot of lot size or living area is worth about $20 per square foot and $30 per square foot, respectively. Each year of effective age reduces the value of properties in this market by about $3,000 per year. Your experience suggests that each additional half-bath is worth $500: each additional full bath is $1,000. Additional garage spaces, wood decks, and pools in these neighborhoods are worth $8.000, $1,000, and $12,000, respectively. No signicant nonrealty items were included in the comparable transactions. Based on the above discussion of the elements of comparison, complete an adjustment grid for the three comparable properties. What is the nal adjusted sale price for comparables l, 2, and 3? A B C D E F G H K L M N O P Q R S Partial solution for appraisal case Subject Comp 1 Comparable 2 Comparable 3 Characteristics Difference Adjustment $ amount Difference Adjustment $ amount Difference Adjustment $ amount Calculation Calculation Calculation Sale Price $510,000 $510,000 Price adj to replace Price adj for AC after purchase A/C after Adjusted Price $510,000 10 Mkt Conditions 2% for inflation .02 x 510,000 $10,200 4% after 11 inflation 12 Location Huntington so so 13 14 Lot size 6,662 6,700 6,700-6,662=38 38x$20= -$760 15 16 living area 3,473 3,920 3920-3473=447 447X$80= -$35,760 17 18 age 5.5 years 7 years 1.5 years 1.5 x $3,000 = $4,500 19 20 baths 3 3.50 1 half bath $500 $500 21 22 deck yes no 1 $1,000 $1,000 23 24 $488,680 $0 $0 25 26