$ per Square Foot Significance

[Bill_FL]

Pam,

Try this. Take a URAR adjustment grid. Instead of sales price, put in the price per foot. Then give it to the realtor and have he/her make adjsutments to the $sf for each item, similar to the way you made adjsutments based on sales price. See what the bottom line comes out to be.

I would also tell her you can basically come up with about anything as a basis. You could figure out the cost per shingle on the roof and adjsut each line item by that if you wanted too, however it wouldnt make alot of sense.

The only come back from realtors that makes any sense for this methodology is that this is how most buyers look at proeprty. We are the ones who throw it out and use the total sales price as a starting point for adjusting. Perhaps, in reality, we should be adjusting the way those in the market buy the property.

 

[Pamela Crowley (Florida)]

The only come back from realtors that makes any sense for this methodology is that this is how most buyers look at proeprty. We are the ones who throw it out and use the total sales price as a starting point for adjusting. Perhaps, in reality, we should be adjusting the way those in the market buy the property.

Again, this does have a little relevance in cookie cutter subs. Outside of that, the buyers also take everything else into consideration. It seems that the Realtors are taking the highest $/SF they can find and then adding for the subject's additional amenities. WAY WRONG!!!!

The sales comparison grid, after all other variables are researched and adjusted for, give you the adjusted values as compared to the subject. When this is completed properly, THIS is the reality of how buyers look at it. It seems to me that it really is only the Realtors that push the $/SF ratio, skew it, and call it a valid value. Keep pushing that into the heads of others, they start to think it's valid when it is not.

Keep going on this please. This thread is getting very interesting.

 

[Austin]

Pam:
The price per square foot does not always decrease as the GLA increases. The reason this appears to happen has to do with the slope of trendline when you graph GLA against sale prices. The critical point is when the slope of the trend line equals the price per square foot of the smallest sale in the data set. If the slope of the trendline goes above this number then the price per square foot gets larger not smaller. The slope of the trendline of GLA graphed against price also indicates the quality of construction of the buildings. If we could post graphs I could show some interesting stuff that would convince you that the present method and theory of doing appraisals is totally wrong because the theory and appraisals principles do not match. The theory says one thing and the practices reflect a contradictory theory.

 

[jtrotta]

Pam

the sold cost per SF range only occassionally will support your findings, due to Limited similar data, that is based soley upon the current market place and economic consistency within the area market of question. :? 8O :lol: :lol:

snowglobe economics - 873 :lol: :lol:

8)

 

[Pamela Crowley (Florida)]

Austin,

Again, I would love to spend a week with you and watch what you do. If you get a chance and want to, please email any of your graphs to me. I'll send you my email address that can handle the larger files.

 

[Bill_FL]

Pam,

Again, this does have a little relevance in cookie cutter subs. Outside of that, the buyers also take everything else into consideration. It seems that the Realtors are taking the highest $/SF they can find and then adding for the subject's additional amenities. WAY WRONG!!!!

Again, this is why I said to hand her the blank URAR with the $sf in the "sales Price" column and let her adust for the differences. I dont know how many commerical appraisers are in the Forum, but I would imagine most would tell you that their basis on most commerical appraisals (when doing sales comparison) would be $sf. Why dont you invite her to the office and sit down and go thorugh the grid with her?

Austin, I have found the same thing. Some times, as size increases, so does the quality level, thus increasing the price per foot. However, in the context of this thread, I was assuming that we were discussing similar quality levels. Take a typical metal prefab building. One of 10,000sf should be more per foot than one of 50,000 if similarly finished.

 

[Austin]

PAM:
Let me tell you about the last person that I demonstrated my theory to. He graduated from college with a degree in real estate and worked a number of years for an MAI in NC, then started working for himself here in town. We were working on a commercial appraisal together and he came by the office so I gave him a demonstration of my theory and methods of doing residential appraisals. He seemed shocked and when he left said: “You have really showed me something today.” I didn’t see him for the next six months. One day another appraiser came by and I ask him what happen to Thomas because I had not seen him in 6 months. He laughed and said: “Thomas saw your appraisal demo, said there is no way I can compete with that, quite appraising, and is selling AFLACK Insurance.”
Two MAI buddies came by one day and I gave them a demo. Their reply was: “That is nice-for you.” Point being: Any time something new comes along, people’s first impulse is to run for the tall timbers and go into a state of denial. Especially if it involves math.

 

[Pamela Crowley (Florida)]

Austin,

I'm no math whiz but statistics combined with logic absolutely fascinates me.

 

[bradellis]

Pamela,

Why not just tell the realtor she/he is wrong because you are dealing with vanilla square footage on the additional size?

Now, I am assuming that the lots are all of similar size and value- if not, the $/SF could be meaningless unless you first extract land value out and then apply the SF thing.

If land value is not an issue, then simply explain that the cost to build a 1000 SF home with 1 kitchen and 2 baths is one thing, and that increasing the size to say 1400 SF occurs at a much lower cost per SF for the extra size. Therefore, the contributory value of the extra size is less than the average for the whole home (unless you are putting in extra kitchens and baths).

Brad Ellis, IFA, RAA

 

[Austin]

PAM: If you want to see an interesting graph and get a good background education in correct appraisal theory, do this:
1. Get out your Marshall Valuation Residential Cost Manual.
2. Create a spreadsheet in your graphics program like Excel.
3. In the 1st column put GLA
4. In the 2nd column, pick a standard dwelling classification like 1 story brick rancher. Start at the front of the book with low quality and go all the way through the quality ratings for 1-story brick ranchers putting GLA in column 1 and cost per SF factor in column 2.
5. Then create column 3 for total estimated cost by multiplying col 1 x col 2.
6. Now graph the results of GLA vs. price per square foot and a second graph of GLA verse estimated total cost and look at what you have. What you will find out is that 1. Quality of construction is the most significant value-influencing factor. The point of that is that present appraisal theory does not even address a method of dealing with quality of construction issues other than flying by the seat of your pants. 2. The second most significant value-influencing factor is GLA differences. This is significant because present appraisal theory uses the wrong sequence of adjustments thus preventing you from making a proper size adjustment.

Once you study this graph come back let’s talk about it.

PS: Caveat: These theories were derived by a non-member of the AI non Phd and with no designation so use them at your own risk. The god's that be have not issued their stamp of approval.