GLA in Sales Comparison Approach

[Joyce Potts]

I'm curious as to how many residential appraisers SUPPORT their (don't pull it out of their ear) figure when adjusting for GLA in the Sales Comparison Approach.

Specifically, if you have a new property with no forms of depreciation and you're using $100 per sf in your cost approach, what number are you using for similar 'new' sales in the Sales Comparison Approach?

Secondly, how are you arriving at your adjustment figure psf foot for properties that have a substantial amount of age/depreciation?

And Florida and Bama appraisers, don't give me that Steve Williamson formula.

 

[Justin Gohn]

Even better, how do Commercial Appraiser SUPPORT the same adjustments. Or is it just residential appraisers that pull things out of you know where?

 

[lmichels]

I use local sales to determine how much to adjust per square foot (usually they're the comparable on the grid, plus the extra comps in the file that were less similar to the subject). I generally has absolutely no relation to the cost to build. Example - 1.2 mil home might cost 175-300/sf to build, but if they are very large the contributory value above the average sf for the area is way way way under the cost to build. Might end up using $50/sf for large 1.2 mil home, and 70/sf for small 300K condo - it all depends on who's in the market and what they think of size as compared to other aspects like location, quality, view, Bathrooms, etc.

Note - I don't derive it from scratch for every appraisal. If I recently appraised a relatively similar home in the area, I'll use the number from that report. If it doesn't match up, I might look into changing it.

 

[George W Dodd]

Joyce,

I'd give you the standard answer to all such questions "matched pairs" but everyone knows it is highly unlikely that such data is available in the quantity needed to determine that adjustment.
I think that most appraisers use a type of extraction even if they are not calling it that. Extraction is the process of removing what you do know to answer what you don't. It is a long process that comes with many years of looking at sales data and subject properties. It is always difficult to explain a method that is not based only as a math formula, but instead as a combination of many influences.
In a simple case you extract the value of the site and all the extra amenities or factors that you are going to adjust for separately and anything else that might have contributed to the sales price that is not square footage (concessions, etc). You do this over and over and over and over again. At some point you will recognize that there are ratios and ranges for properties in your market. As an example, my ongoing analysis of market data indicates that my market adjusts for differences in square footages ranging from 30% to 40% of the total sales price depending on size and value range range and type of property. In my case, I have found that most amenities and features that we adjust for have ratio and/or percentage adjustments to sale prices, and that is why the same cost amenity has a different contributory value for different value ranges.
It is not an exact science, but residential market participants do not act in a completely scientific way either.

 

[xmrdfghap]

This isn't perfect, but it is what we do:

All SQUARE FOOTAGE ADJUSTMENTS we made based on the price/sf of comparables being adjusted. It is typically recognized that square footage represents approximately 60% of the price/sf of a house. This excludes the 40% generally allocated to land and site improvements other than GLA.

Rather than an across the board $/sf adjustment, which does not account for individual attributes and amenities of the comparable, by applying 60% to the price/sf of each comparable we are able to adjust each comparable with greater accuracy and supportability than an estimated, flat, across the board, generalized $/sf would allow us to do.

Using the above method for calculating the adjustments, comparable #1 was adjusted at $54.88/sf, comparable #2 at $56.44/sf, comparable #3 at $60.33/sf.

The percentage used will vary, depending on the subject property. Other factors such as amenities, energy efficiencies, etc are calculated separately.

 

[Sheikh Yerbouti]

Even better, how do Commercial Appraiser SUPPORT the same adjustments. Or is it just residential appraisers that pull things out of you know where?

We don't make adjustments. We don't have to! woohoo

 

[Otis Key]

I'm curious as to how many residential appraisers SUPPORT their (don't pull it out of their ear) figure when adjusting for GLA in the Sales Comparison Approach.

I think you forget a letter.

 

[Michigan CG]

The problem is that if you are called to your state board you might have to explain the differenes in your extra SF adjustments, and of course the ultimate example is matched pairs, which realistically don't exist very often, and if they do, don't always tell true Market Value (one [or two] sales don't make a market).

This is VERY tough, but appraising is not a science, it is an opinion of value....explain everything you know, and explain what you do not know. Get as much info as you can....take a lot of pictures and get pictures from comps. Also build a relationship with realtors so that they will give you the TRUTH about properties.

Show effort to substantiate your value.......Be honest, don't make yourself appear smarter than you are.

I have not addressed the question very well...but that is my opinion (aka appraisal [of the question]):new_llying:

Where is the spell check button??

Quote:

Even better, how do Commercial Appraiser SUPPORT the same adjustments. Or is it just residential appraisers that pull things out of you know where?

Justin, the Income Approach is a huge factor in the appraisal of commercial properties and sometimes adjustments for GLA (Gross leasable area) are not much of an issue. The issue is how much income the property can produce realistically. I can give you many examples.

 

[Doug Wegener]

Linear regression works well for determining a GLA adjustment if you have an adequate pool of comparables. Its generally not too hard to find properties where the GLA is the only significant difference. You might have to adjust for a garage difference or pool difference to isolate the GLA.Nowadays you also need to get time adjustments and make those adjustments to the pool.


Once I have a GLA adjustment this way, I will use it for competing areas in the same market segment (price range)

 

[Oregon Doug]

I'm curious as to how many residential appraisers SUPPORT their (don't pull it out of their ear) figure when adjusting for GLA in the Sales Comparison Approach.

I'm reading this as the opperative word is "SUPPORT" their adjustments - not "how do you calculate" your adjustments, to which my answer is:

Very few residential appraisers provide support for their adjustments - of any kind. It matters less to me if your adjustments are accurate or not but it does matter if you do or don't provide some logical support for HOW you made 'em.

While I may agree/disagree with your specific adjustment (and the resulting value), but as long as you provide some logical support as to how you extracted 'em, you are generally in compliance (value is not a USPAP compliance matter). How you got there is - and keep a copy of your method in your workfile.

Oregon Doug