Time Adjustment In Appraisal

[Nataliamroz]

Hello, so I just started taking real estate appraisal classes and I have to answer this question:

In order to justify a time adjustment, you found two sales that were similar expect for time of sale. One sold a year ago for $80,000., and the other sold this month
For $88,000. You have a sale that is almost identical to your property and it sold 6 months ago for $100,000. What is the adjusted sale price for your comparable?

Could someone tell me the answer and how you found it out? I would really appreciate it. Thank you

 

[Randolph Kinney]

The rate of change for 12 months is $88,000 divided by $80,000 for 12 months or 10% annualized rate. Monthly rate is 0.8333% per month. You need to adjust the $100,000 price by +5% (6 months times 0.8333) which equals $105,000.

 

[Nataliamroz]

The rate of change for 12 months is $88,000 divided by $80,000 for 12 months or 10% annualized rate. Monthly rate is 0.8333% per month. You need to adjust the $100,000 price by +5% (6 months times 0.8333) which equals $105,000.

Thank you very much, so how did you get 0.8333%?

 

[Randolph Kinney]

Thank you very much, so how did you get 0.8333%?

You divide 10% (12 month rate) by 12 to get the monthly rate, 0.8333%.

 

[Nataliamroz]

You divide 10% (12 month rate) by 12 to get the monthly rate, 0.8333%.

Thank you

 

[CANative]

Keep in mind that the adjustment is not for the passage of time. The adjustment is for the change in market during the period between a given sale and "today." So it's a "market change" adjustment rather than a "time" adjustment. It seems like a matter of semantics but it's really not. IMO, it's helpful to think this way when trying to determine if adjustments are needed.

 

[Meandering]

1233456

 

[Meandering]

show the market trend.

 

[CindyR]

i can not imagine any circumstance where I would make a market adjustment based only on two sale transactions. I would need significant and compelling data that actual market changes had occurred.

 

[CANative]

It was a classroom exercise to show the idea.