Sensitivity Analysis For GLA

[Mr Rex]

Are you doing the sensitivity analysis with very similar, near identical properties where the only difference is size of the house?

Yes when available, but the results are reasonably similar regardless.

 

[DWiley]

If you have a 1,000 SF home selling for $100 per SF ($100,000), and site value is 25,000, then the adjustment is going to be around $75 per SF.

If the land accounts for 25% of the total, that means that the improvements, all the improvements, contribute $75,000. That includes a LOT of stuff other than just the base GLA. If one accounts for the items that are adjusted on other lines/fields (baths, garage, porches, fireplaces, etc.), and if one factors in things not adjusted for that typically do not vary by GLA (for example - the contributory value of the kitchen), it is hard to see how the GLA adjustment would be anywhere near $75 for such a property. YMMV.

 

[Joe Flacco]

If the land accounts for 25% of the total, that means that the improvements, all the improvements, contribute $75,000. That includes a LOT of stuff other than just the base GLA. If one accounts for the items that are adjusted on other lines/fields (baths, garage, porches, fireplaces, etc.), and if one factors in things not adjusted for that typically do not vary by GLA (for example - the contributory value of the kitchen), it is hard to see how the GLA adjustment would be anywhere near $75 for such a property. YMMV.

I get what you are saying. I am just trying to lay out the general idea. The adjustment is not 100% of price per SF of improvement. That's not what I am saying.

 

[J Grant]

The saying "What happens in Vegas stays in Vegas " should be applied to the cost approach !! .What happens in the cost approach should stay in the cost approach ...though there is a relation between CA and SCA, they represent different approaches for good reas, aka there should not be a rote use of data from the SCA such as depreciated cost used as a SCA adjustment ( unless it is supported in the market sales and listings as well ) The cost to build per sf while a benchmark, does not always correspond to the contributory value of the additional sf seen in the market. And sometimes additional sf can have no contributory value or even negative in an over improvement.

The site value is backed into the entire purchase price. So while it makes sense to separate out site value in the CA, it makes no sense ( typically) to do so in the SCA. Because the SCA is what buyers pay for the property as a package, and any breakdown of components reflect contributory value to the entire price

For example, subject is a 1600 sf. Home with no lake view. For this example comps we are trying to isolate the sf per sensitivity analysis of the contributory value of 200 sf more than subject . Both comp are on same street as subject and both have 1800 sf, same quality/year build as subject, aprox cost to build the same and same depreciation. One has a lake view, one does not . The lake view house sold for 200k, the non lake view house sold for 175k What was the difference? The lake view house site was worth more in the CA , but since both sites are the same size, we would not adjust for site in the SCA. We would adjust for lake view, because the view is what makes one site worth more than the other. So in view we adjust 25k, now both prices are 175k, and the sf contributory value has nothing to do with the site value.. We would need smaller sf sold comps/ and same /similar sf as subject to get the sf contributory value adjustment of the 1800 sf vs 1600 sf , .

 

[Joe Flacco]

Don't forget that something is attributed to the underlying land. Changes your math.

Of course it matters. Older homes may be selling for $60-$100/SF including the underlying land. The cost new at that point is irrelevant while the portion of the value attributable to the underlying land would factor into the size adjustment.

I am trying to explain that the underlying land DOES NOT change the math.

The value attributable to the underlying land DOES NOT factor into the size adjustment.

 

[J Grant]

RE agents like to price houses as $ per sf including land value which we rarely do as appraisers and imo is a terrible way to price properties but they are allowed to price badly. To show how badly they price properties, look up the listing history of so many properties, on the market a long time, multiple price reductions, ot the reverses , under priced and sold in a day or bidded up.

Homes don't sell for X$ per sf including the land. Homes sell for a total price and ignorant RE agents divde it into a price per SF including the land . Commercial properties can differ I don't appraise commercial so won't comment on it, my comments limited to residential.

Condos since the site is a common element can sell for $ a sf but even that is misleading as who develops that...and are they using the wrong units to compare to get the figure. A high floor open view condo will sell for more than the same sf lower floor unit. Is it selling for more per SF? Or selling for more because of the open view/higher floor? The proper adjustment would be for floor height and or view,

 

[Carnivore]

Just a side note observation. The FNMA 1004 has five sections from the top of the page to the bottom, The top four sections all revolve around HBU development.

 

[Michigan CG]

I don't think I have ever used a $25 or $35 GLA adjustment though. If improvement cost new is $100 per SF or $150 per SF then that would mean the improvement is 75% depreciated.

Cost new of a property includes many things.

It is not only hard costs or cost of materials but soft costs, grading of the property, hooking up to utilities, Entrepreneurial Incentive.

When we build a new 2,000 SF home for $200,000 we might have a total of 15% in the soft costs and sitework.

Our home has two bathrooms, a kitchen, mechanical systems, windows, etc.

The guy next door decides his new construction home is going to be 2,200 SF instead of 2,000. The cost to add 200 SF is not the same per unit (SF) because many of those costs have already been realized. The building permit didn't increase in cost, the sitework did not increase, the bathrooms are still the same, the kitchen is still the same, the electrical is still the same.

If one looks at new construction the smaller houses always cost more per SF than the larger houses when all other things are equal.

 

[Michigan CG]

Homes don't sell for X$ per sf including the land. Homes sell for a total price and ignorant RE agents divde it into a price per SF including the land . Commercial properties can differ I don't appraise commercial so won't comment on it, my comments limited to residential.

$/SF is a unit of measurement and a tool. If the tool is used correctly it can be a valuable tool. To say it is ignorant to use $/SF is not credible.

 

[Michigan CG]

let me educate you.

Do I get CE hours?