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  #1  
Old 10-21-2011, 11:02 AM
john40 john40 is offline
 
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Default Inconsistencies with Adjusted $/SF GBA & Adjusted Sale Prices

My concern involves inconsistencies between adjusted unit values and adjusted sale prices for an office building.

In summary, 3 commercial office sales were used:
#1 sold for $192,500 and has an unadjusted $/SF GBA of $93.90.
#2 sold for $60,500 with unadjusted $/SF GBA of $39.21.
#3 sold for $190,850 with unadjusted $/SF GBA of $42.37.

Net adjustments for each sale are -50%, +10% and 0%, respectively.

Therefore, the estimated value of the subject by overall sales price is:
#1 = $96,250
#2 = $66,550
#3 = $190,850

However, notice that the indicated value of the subject based on unit of comparison (price per SF of GBA) is much tighter:

#1 = $46.95
#2 = $43.13
#3 = $42.37

Of course, the appraiser selected a unit value within this range and applied it to the square footage of the subject to arrive at his market value estimate: $45.00/SF x 3,500 SF GBA = $157,500.

Arguably, the market lacks an adequate number of sales. However, unfortunately, this method does not account for the wide bracket of adjusted sale prices among the comparables, ranging from $66,500 to $191,000. This leads me to question whether these sales are truly comparable and competitive, and if one or more of them could even be considered an adequate substitute for the subject. Any thoughts...?
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Old 10-21-2011, 11:11 AM
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CANative CANative is online now
 
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Sometimes the sales comparison approach is only good at providing a broad range of MV indications.

Is there an income and cost approach in the report?
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Old 10-21-2011, 11:48 AM
john40 john40 is offline
 
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No Cost Approach. The building is about 40 years old, has been vacant for 2 years and is need of renovations.

An Income Approach was done, although there are some issues with it as well that call into question its reliability. In addition, prior to its vacancy, the subject was owner-occupied.
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Old 10-21-2011, 12:10 PM
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So, The subject is a 3,500 sf building. C1 is a 2,050 sf building, C2 is a 1,543 sf building, and C3 is a 4,504 sf building. C3 didn't need any adjustments. C3 is most like the subject. The selling price was $42.37 per sf.

This is a one comp appraisal. The value of the subject should be $148,295 ($42.37 x 3,500 sf).
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Old 10-21-2011, 01:23 PM
john40 john40 is offline
 
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Unfortunately, C3 sold subject to existing leases which were not adjusted for under property rights conveyed. There are a number of remaining concerns, but my main question is how much importance should be placed on the range of adjusted sales prices with respect to commercial property?
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Old 10-21-2011, 02:49 PM
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Look to the reconciliation of the approach for explanation. If there is none than ask for some or note none was given. There could be a reason, and if it's not stated than that's an issue.
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Old 10-21-2011, 03:19 PM
Lost Cause Lost Cause is online now
 
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Quote:
Originally Posted by john40 View Post
Therefore, the estimated value of the subject by overall sales price is:
#1 = $96,250
#2 = $66,550
#3 = $190,850

Any thoughts...?
Yes: Since when did we start applying the net adjustment to the gross sales price?


Quote:
Originally Posted by john40 View Post
...my main question is how much importance should be placed on the range of adjusted sales prices with respect to commercial property?
Answer: None.
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Old 10-21-2011, 03:40 PM
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Quote:
Answer: None.
It's useful to corroborate the results of the income approach as a reasonable range.

I'm working on a $52 million community center (almost a power center but it doesn't have any competition killers.) 186,000 square feet give or take, tax value is about $280/sf. Comps are not really similar. Income approach is about $44 million using a 6.5 cap ($240/sf). A couple of similarish sales at $220/sf. Others at $150 to $177 per foot.
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  #9  
Old 10-26-2011, 02:05 PM
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In today's market, I am happy to find anythinig within $20/SF of each other
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  #10  
Old 10-26-2011, 04:15 PM
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Quote:
Originally Posted by Lost Cause View Post
Yes: Since when did we start applying the net adjustment to the gross sales price?


I second that emotion! Odd approach--were'd you get it!
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