GLA Adjustments

[Terrel L. Shields]

GLA adjustments:

Sales range between $290-$320K....
GLA range 2,900 sf ($290K), 3,000 sf ($305K) and 3,200 sf ($318K)....
All other things being equal (including land value)....
What is the GLA adjustment????

If you are determining the contribution of the gross living area (space) of the house, the land value has to be deducted out. Assuming the land values are exactly the same is hardly credible in most non-cookie cutter subdivisions.


WRONG
House sale 1 $400,000 House sale 2 $350,000
House GLA 1 2,000 SF House GLA 2 1800 SF
DIFF $50,000 ÷ 200 SF = $250/SF

RIGHT
House sale 1 $400,000 House sale 2 $350,000
House GLA 1 2,000 SF House GLA 2 1800 SF
Land Value 1 $200,000 Land Value 2 $180,000
GLA contribution $200,000 # 2 $170,000
DIFF $30,000 ÷ 200 SF = $150/SF

 

[ucbruin]

LOL. Fairy dust and unicorn education. How much did that course cost? I'll answer, 100% too much.

That's funny and true....
I can't recall any class that I've taken since 1987 that didn't have examples with perfect data....
I can't recall any class I've taken since elementary school that didn't have examples perfect data....

I remember math books had examples at the end of each chapter...
X + Y + Z...
Test question
X + Z - square root of PI = ?
Damn....

 

[residentialguy]

How much is the land worth? How much are the improvements other than GLA worth? How much adjustments for quality and/or condition?

Land, view, C and Q all the same...
I'm just taking my online CE so everything is similar except for 1 characteristic....
In the course example land value range between $70k to $75k....

That doesn't make sense. Your GLA adjustments would be zero if your land value is the same.

 

[ucbruin]

@Terrel L. Shields
@residentialguy
@Mr Rex

I guess there was no land value in the example....

use paired data analysis to develop a market-based GLA adjustment factor

• Sale #1: $500,00 sales price, 2,010 square feet, contemporary, 21 years old, two car garage, C3 condition, Q4 quality, and a neutral residential view.

• Sale #2: $522,000 sales price, 2,280 square feet, contemporary, 19 years old, 3 car garage, C3 condition, Q4 quality, and a neutral residential view.

• Sale #3: $516,000 sales price, 2,290 square feet, contemporary, 20 years old, 2 car garage, C3 condition, Q4 quality, and a neutral residential view.

 

[RCA]

GLA adjustments:

Sales range between $290-$320K....
GLA range 2,900 sf ($290K), 3,000 sf ($305K) and 3,200 sf ($318K)....
All other things being equal (including land value)....
What is the GLA adjustment????

From my experience I could say this:
1. If those prices are averages for a large number of home sales under the same market conditions, then those prices could most likely be used to calculate a GLA adjustment.

2. If there is a substantial variation in prices for each GLA value, e.g. 3200sf, then there are likely other forces at work, and you need to isolate those through regression or some other method.

3. If those averages are from a handful of sales, then you will need to perform an efficient non-parametric regression, such as MARS, on those sales and any others you can throw into the mix, in order to get a reasonably exact GLA adjustment via a model with a good R2 value.

 

[Terrel L. Shields]

@Terrel L. Shields
@residentialguy
@Mr Rex

I guess there was no land value in the example....

use paired data analysis to develop a market-based GLA adjustment factor

• Sale #1: $500,00 sales price, 2,010 square feet, contemporary, 21 years old, two car garage, C3 condition, Q4 quality, and a neutral residential view.

• Sale #2: $522,000 sales price, 2,280 square feet, contemporary, 19 years old, 3 car garage, C3 condition, Q4 quality, and a neutral residential view.

• Sale #3: $516,000 sales price, 2,290 square feet, contemporary, 20 years old, 2 car garage, C3 condition, Q4 quality, and a neutral residential view.

Shows the weakness in such "examples". You have to assume all the comps are exactly the same land value, that a third car space is worth zero, etc.

You really need to isolate only the GLA to make a GLA adjustment. Otherwise, you double dip if you make any other adjustment...There is no real shortcut to doing a paired sales "right". Yes, you might be guessing somewhat at the contribution of the other factors, but that's where regression - a short "down and dirty" one can help make sense of what and which factors are driving value. But the land one is critical since it is not age dependent. Land valued "as if vacant and available for its highest and best use" is going to capture the obsolescences that should be identified or adjusted for.

 

[residentialguy]

@Terrel L. Shields
@residentialguy
@Mr Rex

I guess there was no land value in the example....

use paired data analysis to develop a market-based GLA adjustment factor

• Sale #1: $500,00 sales price, 2,010 square feet, contemporary, 21 years old, two car garage, C3 condition, Q4 quality, and a neutral residential view.

• Sale #2: $522,000 sales price, 2,280 square feet, contemporary, 19 years old, 3 car garage, C3 condition, Q4 quality, and a neutral residential view.

• Sale #3: $516,000 sales price, 2,290 square feet, contemporary, 20 years old, 2 car garage, C3 condition, Q4 quality, and a neutral residential view.

Dude, just use your adjustment price list.

 

[ucbruin]

Dude, just use your adjustment price list.

I do and will continue to do so....
I was just surprised at the result of the example.