1. Welcome to AppraisersForum.com, the premiere online community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Direct Comparison Theory Question

Discussion in 'Commercial/Industrial Appraisals' started by JC888, Oct 17, 2011.

Thread Status:
Not open for further replies.
  1. JC888

    JC888 New Member

    0
    Apr 20, 2011
    Professional Status:
    Appraiser Trainee
    State:
    Canada
    I got a question in regards to how a change in subject's operating expenses (operating expenses ratios) can affect the market value derived by using the direct comparison approach? ( referring to multi-residential properties)

    The only thing I could think of is due to increase in the subject's operating expenses ratio, different weights will be given to the best comparables, thus deriving the new market value. Is my thought process correct?

    Any comments is greatly appreciated,
    Thanks.
    JC
     
  2. Terrel L. Shields

    Terrel L. Shields Elite Member
    Gold Supporting Member

    135
    May 2, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    Indirectly, expenses increase with the age of the building...a modern building will have more efficient energy saving devices, will suffer lower short term repair costs, and overall a newer building should have a lower expense ratio and a longer life
     
  3. Elliott

    Elliott Elite Member

    16
    Apr 23, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Oregon
    Eh! Hoser. About the only thing I could guess based on the cryptic question....is something
    along the lines of a increase in OE could some how be related to DSC approach if we are
    somehow trying to make an adjustment for economic obsolescence. Is this a test question?
     
  4. PropertyEconomics

    PropertyEconomics Elite Member

    0
    Jun 19, 2007
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico
    Economic obsolescence (ie external) for increased expenses within (functional) .... really??????
     
  5. Ken B

    Ken B Elite Member

    41
    Feb 18, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    Differences in operating expenses, all other things being equal, would be adjusted as an Economic Characteristics line item.

    Good luck supporting that adjustment with matched pair analysis. :)
     
  6. farmguy

    farmguy Member

    0
    Jun 27, 2007
    Professional Status:
    Banking/Mortgage Industry
    State:
    Texas
    How about Gross Rent Multiplier? It is a SC technique. I would consider OER in comparing different GRM's.
     
  7. leelansford

    leelansford Elite Member

    24
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois

    I have to ask:

    Is the change in the operating expenses due to management of the subject OR things integral to the subject property?
     
  8. TigerBait

    TigerBait New Member

    0
    Nov 15, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Virgin Islands
    "Direct Comparison" is not an approach to value......

    Just sayin
     
  9. PropertyEconomics

    PropertyEconomics Elite Member

    0
    Jun 19, 2007
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico

    Lee ... you and I are thinking the same thing.
     
  10. leelansford

    leelansford Elite Member

    24
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois


    Great minds think alike.




    :)
     
Thread Status:
Not open for further replies.

Share This Page