The land value adjustment is based on the square footage of the site which is converted into a unit value by applying a well recognized land technique method known for estimating excess land value between similar lots. This method works as follows: the first quarter of site is valued at 40%, second quarter at 30%, third quarter at 20% and the final quarter of the site at 10%. This 10% is converted into a unit value through the analysis and then applied to the comparables as a positive or negative depending on whether the subject is superior or inferior to the comparables.
Value adjustment is based on the breakdown of the total real estate into percentages for the six basic components: Land, Masonry/foundation, (GLA) Gross Living Area above grade, Basement Finishing, Garage & its foundation, and Miscellaneous. These components are all interactive with typical market ranges to reflect and adjust for the market.
The values that are abstracted are from the subject's market itself and reflected in a unit value based on size.
Miscellaneous has been further broken down to both interior amenities and exterior amenities. Interior amenities would be fireplaces, extra bathrooms, air conditioning and any other amenities within the structure. The exterior amenities include landscaping, driveways, decks, patios, porches, and outbuildings.
By applying this statistical method to the subject's GLA the square foot adjustment becomes obvious for use in the appraisal.
Also a basement finish adjustment per square foot is available if needed.
After analysis and entering these adjustments the appraiser can now make any remaining adjustment to the appraisal.
Conclusions are formed and adjustments to the values of the subject’s improvements and its site can be made. Then for supporting analysis enter the adjusted values on the comparables for further evidence of the value.
This method is based on the comparables used in the appraisal. and takes into consideration only the difference for the square footage above grade. The formula is market derived by taking the mean or average of the price paid per square foot of the comparables and using 25- 35% of that to represent the contributory value for differences in living space in my market. To determine appropriate price per square foot to be used in the adjustment one must first make reductions for the following which typically come to 65-75% and are addressed independently and adjusted elsewhere in the sales grid.
They are the land value, all improvements below grade, and all other improvements outside of the actual house structure.
The method is roughly 25-35% for land value, approximately 10-20% for foundation, and depending on quality 0-10% for interior finishing of lower level, again depending on quality and design 0-15% for garages, with remaining 0-15% for miscellaneous amenities which would include any other type of amenity which is individually adjusted for in the grid.
Note: All ratios are based on the comparables used in the analysis and must total 100%
The difference between reproduction cost new or replacement cost new of the improvements and the present worth of the improvements, both measured as of the date of the appraisal. In measuring accrued depreciation, the appraiser is interested in identifying and measuring the loss in utility experienced by the subject structure in its present condition, as compared to the utility it would have as a new improvement representing the highest and best use of the site. Accrued depreciation is sometimes referred to as diminished utility and inherently includes all aspects of physical, functional, and economic depreciation both curable and incurable directly through the market.
Modifications for known adjustments used in the square foot, basement finishing, baths, fireplaces, garages, decks, porches, heating and air conditioning, effective age, and lot size and lot amenities. Only two other main adjustments are left, the quality of construction and condition which both are residual driven and based on experience, knowledge and observation.
Excellent training tool for new appraisers.