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  #1  
Old 11-17-2003, 08:09 PM
thommrich thommrich is offline
 
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When adjusting comps to account for differences in square footage what is the correct method. I have heard two scenarios. One person said that you should multiply the difference in square footage for the comp and multiply it by the value/square foot. I have also seen a more conservative approach to use only a fraction of the value/square foot. What is right?
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Old 11-17-2003, 08:39 PM
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Whatever the market reflects. There is no set number, formula or standard. Your comps should tell you how much to adjust (if they are really comparable).
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Old 11-17-2003, 08:40 PM
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Pamela Crowley (Florida) Pamela Crowley (Florida) is offline
 
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Oh boy.

The square footage adjustment in a residential appraisal can vary greatly for a variety of reason. There is no set amount or formula. The individual sub-market along with the data for the age, size, quality of construction and a number of other items that may or may not affect that particular sub-market or style or ......... can all cause different adjustment for the square footage.

There is no standard. Each appraisal I do eventually tells me what the square footage adjustment should be for that particular property as I work out the various other adjustments.

Quote:
One person said that you should multiply the difference in square footage for the comp and multiply it by the value/square foot.
THAT person has no idea what they're talking about!!!! Please don't pay any attention to that persons real estate opinions - especially regarding values. "A fraction" is more correct and that fraction is determined on the individual basis via the correct analysis of that data.
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Old 11-17-2003, 08:56 PM
Ghost Rider Ghost Rider is offline
 
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I've made GLA (thats Square Footage) adjustments for as little as $5/sf to as much as $250/sf - It's all a function of the market - This is the same for ALL adjustments made in a report.

The Price/SF. isn't something that should be used - For example - A home which sold for $100,000 and is 2,000 sf, that would yield price/sf. of 50. Believe me, a 200 sf. difference in Gross Living Area is not worth a $10,000 adjustment, or, in the case of this example, a 10% adjustment, except in some of the most extreme situations.
  #5  
Old 11-17-2003, 09:05 PM
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Don't get caught in making the extractions from just the 3, 4, 8 (whatever number) of sales you use in the final report. Analyze the relevant market, prove to yourself what it should be, then apply to the sales you select to include in the final report.
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Old 11-18-2003, 06:24 AM
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Quote:
Dan Leggett Posted on Nov 17 2003, 10:05 PM
--------------------------------------------------------------------------------
Don't get caught in making the extractions from just the 3, 4, 8 (whatever number) of sales you use in the final report. Analyze the relevant market, prove to yourself what it should be, then apply to the sales you select to include in the final report.
thomrich is a homeowner, not an appraiser (remember, he was the one who asked about fraud in Pittsburgh).

Like MHMerriman, I've made adjustments anywhere from $10 up to $125 a square foot, and it all depends on the market and what the market tells us. I think what Mr. Rich is asking us (and please tell me if I am wrong here Mr. Rich), is that he had several appraisals that had quite a large discrepency, and he is finding a lot of it has to do with square foot adjustments. For an example (and this is just an example!), in a market where the house prices are $350,000-$400,000 you would be much more likely to find a $50 per square foot adjustment versus a $10 per square foot adjustment; is that what you are getting at?
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  #7  
Old 11-18-2003, 08:24 AM
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thommrich

I'm not certified, so someone correct me if I'm wrong.

In our market, for new construction in the price range of 300,000 +/-, a typical sq. ft adjustment may be around 40 - 50% of construction cost. Or less!
This may sound low, but you have to remember that there are many fixed costs that are the same for say a 2000 sf home verses a 2300 sf home.
Take the kitchen for example It is very expensive compared to say bedroom area, and there usually is only 1 kitchen. Impact fees, if any, are the same, site improvements are similar. Etc.
Therefore you are basically adjusting bedroom or living area of the house in your sq. ft adjustment, as bathrooms are normally adjusted seperately.
If there are 2 kitchens, it won't add value anyway because it's functional obsolescence. Most probably !
Hope this has helped you some. Good Luck !
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Old 11-18-2003, 10:10 AM
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I tend to use an approximation from the cost approach. If SF cost is $130 per SF, the adjustment to the comps difference would be about $30 to $35 per SF or about a quarter of the replacement cost. Which works out that high quality homes get larger adjustments, lower quality get lower adjustments. This method isn't written in stone but seems to work most of the time.

Does any see a problem with this method?
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  #9  
Old 11-18-2003, 10:13 AM
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Quote:
Does any see a problem with this method?
yes, it isn't necessarily market driven. Your market, through paired sales, could show you that the appropriate adjustment is $75 per square foot, or $25 per square foot, etc. Paired sales do work, just a bit time consuming....hey, we've got plenty of time right now, eh?
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  #10  
Old 11-18-2003, 10:27 AM
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On a new home, depreciation would NOT have to be considered, whereas on an older home, physical depreciation would have to be considered.
This would mean that the SF adjustment on a newer home in the same market would be higher than that of an older home.
Any problems with this ?
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