Gross Living Area Adjustments

[Robert Gonsalves]

Hello;
I'm interested in hearing other apraisers thoughts on GLA adjustments and how they come to dollars adjustments on the grid. Is there a formula?

 

[Tina]

The appraisers job is to measure "market reaction".

We've found several homogeneous subdivisions and dug up recent sales that were similar except for gross living area. Then we analyzed the disparities in sales prices and gross living and then made conclusions about what the market is recognizing on a per square foot basis. This requires a sufficient pool of data so you can look for patterns. After lots of research you should be able to get a feel for what the market reaction is. This is known as a matched pair analysis.

I know it's a lot of work, but, I feel it's the only way to be able support and defend your adjustments.

Hope this helps!

TB

 

[Austin]

There is a formula that will result in a perfect size adjustment. The formula is derived by analyzing market data to extract it. There is also a formula to determine if you did the adjusting correctly and completely. That formula is easy: slope of trend line =0. If it ='s anything but zero, than you haven't finished adjusting.

 

[Joker]

10%

 

[Tina]

10% of what Doug??? :blink:

TB

 

[Mike Garrett RAA]

Yes there is a formula and you will learn it after you have done several thousand appraisals...in the mean time, do pair analysis to determine what to use...OR, ask your mentor.

 

[Mike Simpson]

Gather as much of OPW (other peoples work) as you can get your hands on.

Talk to experienced agents, area builders & developers every chance you get.

In my area...GLA adjustments of ~1/3rd the construction cost new in the Cost Approach is typical.

-Mike

 

[Elliott]

$30/SF (high value properties $50/SF)

works for me

elliott

 

[Lonny Hogan]

I don't believe there is only one right way or that there is any magic formula no matter how many thousands of appraisals you do. It's best to focus on the logic of the gross living area rather than trying to find a mathematical formula.

In cases like these you have to go back to the fundamentals and kindof reason it out. The premise is more GLA is better and therefore more valuable. I think just about all appraisers would agree with that. So the starting point is all other things being equal, the bigger house is worth more.

The question of how much more valuable comes from extrapulation. This is why I always bracket my sales and even will try to include a property that is 3-4 hundred feet smaller and one that is 3-4 hundred feet larger than my subject. I can usually see the gross living area adjustment easier this way.

What I've found from this practice is that usually property's that sell in the 200-300 thousand dollar price range will be best supported with $20-30 per square foot adjustments.

300-400 thousands work best with 30-40 per square foot adjustments.
400-500 thou get 40-50 per square foot adjustments etc.

This is a guideline only, that I utilize as a starting point. I've also found that when properties have a large number of adjustments from things like lot size differences and view amenities it causes the significance of the gross living area to go doww, therefore a use the lower end of the range.

When properites are relatively similar, like in cookie cutter subdivisions with similar upgrades, the GLA is a significant contributor to value. So I use the higher end of the range.

One way to see if your doing it right is to watch the adjusted price range of your comps. If increasing the GLA adjustment makes the inferior comp and the superior comp closer to eachother than your likely doing it right.

Of couse your calculating other things at the same time, so its important to make sure you havent overlooked an adjustment. The whole process comes from comparing your comps to eachother before comparing them to the subject.

 

[Austin]

Oh lord! Just when you thought things couldn't get any worse the sky falls down. I think the A-rabs must have poised our water or something. It is not a full moon is it?