Room and GLA adjustments

[Mike Kennedy]

in our area also makes a difference.

TW. if your local market customarily indicates the Buyers Prefs you indicate above, and adjustments for specifics are indicated and CAN be fullysupported by actual market data, then go for it. Perhaps I missed something - but - if that IS the case in your market - then why are you questioning what your Market is telling you?

 

[Lee Lansford]

TW, THE answer is "it depends".

I certainly have experienced instances where a difference in the room count requires an adjustment in addition to any adjustment for GLA that may be necessary.

Analyze and explain...that's all you can do.

Lee

 

[TW Gray]

And thats what we do...

Thanks

 

[Wally Jones]

Point 1. Cost does not always creat value. Are you sure you are not adjusting for the added utility?

There is a relationship between cost and value. Cost does not necessarily equal value. Yes, the adjustment is made for the added utility of the bathroom. The amount of the adjustment is derived from what the market is willing to pay for the added utility.

I was attempting to point out that an additional adjustment for a bathroom (which is also included in the adjustment for GLA) is supported due to the costs involved for plumbing fixtures (which adds utility to the room). (The amount of the adjustment is still derived from the market.) Adjusting for an additional room may be warranted if it can be shown that the market would support that adjustment. How to determine the amount for such an adjustment (remembering that an adjustment for the additional GLA has already been made)? Could one calculate the cost to build the extra room (adding for windows, doors, closet, etc.) and then determine what portion of that cost is supported by market data? For those who work in markets where matched pairs analysis is available............well, I'm jealous.

It seems that this could easily be one of those areas that has been perpetuated by tradition rather than practical application. But then I work in a limited market and don't get out much.

 

[David Beavan]

The problem as I see it is who is the mythical "typical buyer" on which we are supposed to base our adjustments ? Is it a family with 4 children or a retired couple?

 

[Dona Roberts]

I'm confused

Becuase I am adjusting for 2 differnt reasons. One for the rooms and the additional utility and value that they provide and the gross living area for the additional value and utility provided by the additional square footage. The reason I do not adjust for less than 100 square feet is because we all know how Realtors measure.... Or do we. Assessors seem to be very accurate and even then we do not match perfectly!!

TW-
IMHO-I would be very careful adjusting for room counts as you do not actually inspect (normally) the interiors of your comps to know exactly what the room count is. I know many realtors call a room a bedroom and we would not consider it such. How do you back out the bedroom GLA and add it back in as an adjustment? Do you know the exact bedroom GLA of your comps? The market determines your adjustments and many of the functional utility issues are accounted for in the GLA and/and or sales price of your comps, therefore you may be, or close to double-dipping.
.

 

[Fred]

There are some items in the thread that could use some attention.

Some people want to raise the question of good data v bad data. Why not work on assumed good data first and then worry about what to do if data are suspect? If adjusting good data is something that can’t lead to consensus, then you won’t have to worry about bad data.

The two conflicting adjusting strategies are being debated here: one is mathematical extraction from data and the other is theoretical (although some might call it PFA, SWAG, voodoo economics, or worse, rectal extraction - and sometimes the last one might be right).

Here are examples from paraphrasing posts
1. Strict mathematical extraction - "Can be fully supported by market data"
2. Plausible, perhaps credible conclusion driven by the principle of diminishing returns - Two baths are a greatly superior to one, three baths are proportionally less superior to two.

Made-up adjustments may have an unnecessarily bad rep. If you call them "principles-driven adjustments" (a phrase I invented for a seminar is sales comparison, thank you, just send me a dollar each time you use it ), don’t the adjustmetns take on a more reasonable air? It’s the crisscrossing of the lines that I think causes confusion in the debate and drives me nutty. I hate when the person made up adjustments and says they are market derived. After all, unless you have perfect sales, three sales can only yield one adjustment.

 

[TW Gray]

TW-
IMHO-I would be very careful adjusting for room counts as you do not actually inspect (normally) the interiors of your comps to know exactly what the room count is. I know many realtors call a room a bedroom and we would not consider it such. How do you back out the bedroom GLA and add it back in as an adjustment? Do you know the exact bedroom GLA of your comps? The market determines your adjustments and many of the functional utility issues are accounted for in the GLA and/and or sales price of your comps, therefore you may be, or close to double-dipping.
.

Do we ever know the exact room counts of a MLS sale unless we have appraised it ourselves. If you want to go down that road I can't tell you how many times I have called Realtors to find out that they were padding room count. Dining Rooms are a great one for that. 4th bedrooms, and then you look at the sheet and see that the room is the size of a walkin closet. This is by no means a science and never will be. We have to take what we know, what we can find out, what we can determine, and attempt to make an educated decision from there. The problem is somewhere down the line someone decided this was a science. You can't write a mathmatical equation to determine what people are willing to pay and what they desire in a home. And for someone to say that they can extrapulate the necessary information from what can be fictitious data sheets is also a slippery slope.

 

[john snyder]

I recently finished an RCS (rent comparable study) for an apartment complex.

I was able to find in the market place after much in depth searching, comparables that showed increased rents for bedrooms and baths when the square footage was the same. This may be applicable in single family.

In my case a 800 square foot 1 bed 1 bath rented for $ 600 and a two bedroom 1 bath with 800 square foot for about $ 675. Both rent comps from the same complex.

I did the same with baths, same size units and bedrooms, in the same complex but an additional 1/2 to full bath, the difference was $ 50 to $ 75 per month per 1/2 bath.

I also was able to find data for a square foot adj. where again all was equal with comps except for size, from the same complex, and the difference just for square footage was an adj. rate of .45 per square foot.

A reviewer asked me if I was double dipping adjusting for square footage along with bedrooms/baths. When citing quantive evidence its pretty hard to argue with the market derived findings.

The bigger problem is how many samplings does it take to have confidence in your adjustments? That is why a pinch of quantive and a dash of qualitative is the best your ever going to get.

Try it in single family analysis in cookie cutter subdivisions.

john