CMA, Day 4


Thursday’s Objective: Making Adjustments

Adjusting Value for Property Differences:

  • When comparing similar properties, there are always differences. Be sure to account for differences in your subject property’s value by adjusting the comparable properties. 
  • Add or subtract value for difference in lot or acreage size.
  • Do the same for feature differences, such as bedrooms, baths, garage, upgraded kitchens, baths etc.
  • Look at financing differences that could have influenced sale priceSeller financing can at times result in a higher price paid for a property that is not related to its true value. Remember that these need to be “arms length” transactions.  There should be no special situations, family sales, distress sales, etc.

Additional Tips:

Factors Affecting the Comparative Market Analysis:

  1. Location: Location is affected by backing up to businesses, on a major street, any hazard that would affect value. (noise 5-7%) i.e:  high power lines, water towers, apartment building backing to house
  2. Size: Houses should not vary more than 400 square feet of appraisal property or 20% of total square footage. 
  3. Add-Ons:
    • Enclosed patio, even heated or cooled, will bring 25% of the square footage value
    • If addition is from the original foundation then 50% is reasonable and screened-in or glass porches, only 15% of square footage value.
  4. Age:
    • Appraisers try to appraise within 5 years in age, and preferably in the same neighborhood. If they cannot find something in the same neighborhood, they will extend the boundaries for their search, but try to stay within a 5-mile radius, preferably in the same city or school district.
    • Do not compare new construction to existing. Sometimes you find a fairly new subdivision with no comps, this is where you will have to go into another subdivision within the 5-mile radius.
    • Try to make sure new construction comps are new, in the same city, and same school district if possible.
  5. Condition: Estimate costs of repairs or improvements that would make the comparable equal in condition to other properties in the area. Some of the conditions are, for example, odors (pet, chemicals, smoke, cooking, and medical), clutter, drive up appeal, and cleanliness.

Features to consider:

    1. Baths – full bath, 1/2 bath
    2. Garage – Single car, double carport
    3. Garage Conversions – When comparing these try to compare to other garage conversions. If the additional square feet are from a garage conversion, the owner may have a hard time getting it sold. The appraiser will likely give $5,000 for the addition, then deduct $10,000 for the loss of the garage. You may want to offer property with garage being reconverted at seller’s expense as an option.
    4. Fences – Stockade, Chain Link, Vinyl
    5. Exterior – Brick, frame
    6. HVAC – Central Heat, Central Air Fireplace- Wood-Burning, Decorative
    7. Other Kitchen Equipment – dishwasher, disposal, range, built-ins, microwave, trash compactor, countertops
    8. Sprinkler System – Front, Back (depending on size), automatic system
    9. Pools – Depends on type, age, normal for neighborhood, above ground, vinyl, gunite.
    10. Covered Patio – Small, large, or none
    11. Draperies – Custom draperies/blinds
    12. Finish Work – Tile, granite, wood floors, tumbled marble, travertine, faux finishes
    13. Extras – Storage buildings, storm cellars, gas grills, decks, fans, wall finishes, storm windows, upgraded light fixtures, electric garage door opener, mirrors, doors, moldings, etc. Ask the property owner to help you price these extras. (in most markets these will end up being “perks” that make the property stand out against the competition, but may not actually add value)
    14. Allow for depreciation – do not use new prices.
    15. Acreage – Valued by city, lot size and use. Where does house sit on land, can it be subdivided?

Action Items:

  1. Pick an older property and a newer property:
    • Conduct a CMA on each property
    • Use what you now know about adjustments