Section 6 Sales Comparison Flashcards Preview

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Flashcards in Section 6 Sales Comparison Deck (19)
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1
Q

Sequence of adjustments

A

Privates First Class Earn Mildly Lower Pay Except in the US Navy - Property RIghts, Financing, Conditions of Sale, Expenditures after purchase, Market conditions, location, Physical, Economic, Use/Zoning, Non Reatly

2
Q

What is the property rights adjustment if the subject has a deficit rent that reduces its value by 2% and the comp has excess rent that increases its value by 3%

A

.98/1.03 = .9515 95.15%

3
Q

What type of rate is used to discount excess rent?

A

a rate higher than the yield rate

4
Q

Property rights adjustment - how do you calculate the adjustment when the subject has excess or deficit rent?

A

Sale price of comps leased fee
/ .95 (for 5% below market) or .105 (for 5% above market)
= adj sale price for each comp
less adjustment for subjects property rights

5
Q

7 situations that may warrant a financing adjustment

A

Below market seller financing, sale price deferred as a tax avoidance device, loan assumption, buyer assumes special assessment, seller procures loan buydown, buyer pays all cash to close quickly, purchase subject to zoning change w/ delayed closing

6
Q

4 ways to quantify a financing adjustment

A

Paired data, discounting to yield, flat discounts, ask participants

7
Q

Discounting to Yield method

A

Grid w/ calculator on top, PMT, balloon, PV & Spread on the side. Calc the payment, switch to the balloon, calc the FV, switch the i and calc for PV - that’s the present value of the loan and the spread is the difference between the 2 PVs

8
Q

What’s the disadvantage of the Discounting to Yield method?

A

it overstates the worth of the financing

9
Q

Equity Yield Model

A

Grid w/ calculator on top Market, Ballon, Contract, Balloon on the side. calc the payment if market terms, change the n for the balloon calc the FV change the n & i to reflect the contract terms and calc the payment then change the i to reflect the balloon. Then put in the difference in payment and the difference in FV and use the equity yield rate to calculate the PV or amount overpaid.

10
Q

6 situations that may warrant a conditions of sale adjustment

A

sale between family members, seller paid buyers points, seller paid buyers closing costs, assemblage, price is lowered to sell quickly, buyer or seller not well informed

11
Q

Expenditures post sale adjustment

A

atypical expenditures that a buyer knew about during negotiations, always upward, Razing Costs or other know expenditure negotiated w/ the deal. Cost + incentive

12
Q

Market conditions adjustment

A

due to PIE - price, income, employment. The cost or availability of debt capital, consumer attitudes and practices

13
Q

5 situations that warrant a market conditions adjustment

A

contract sale (land contract, delay in closing), option price, delayed closing, contingent sale, build to suit, change in conditions due actual changes not just time/CPI

14
Q

Economic adjustments

A

micro economic comparision of 2 properties. Examples differences in operating expenses, management, tenant mix, rent concessions, lease expirations, renewal options, expense recovery clauses

15
Q

If two properties are located in different Cities with different real estate taxes is the adjustment Economic

A

no its locational. If two properties in the same city had different % tax burdens, that would be economic.

16
Q

Use Potential adjustments

A

these adjustments are for zoning etc (floor area ratio?) and are hard to support and should only be used when better comps are not availalble

17
Q

Ranking analysis

A

rank the sales, put the subject in the slot it belongs in in the ranking and value accordingly

18
Q

What is inbreeding?

A

weakness of sales comparison when there aren’t enough comps. ie supporting adjustments w/ the same comps in the analysis. or using the same comps in multiple approachs

19
Q

Breakeven analysis

A

A test of reasonableness used in mutifamily property valuation. Operating expenses + Debt service/Potential gross income. Multiply by the number of units to find out how many you need full to breakeven.