In: Operations Management
A subject property has 2,800 square feet, 4 bedrooms, 3 baths, a 20,000 square foot lot, brick exterior, and is in “good” condition. The proposed sale price is $185,000.
A comparable property sold for $175,000 three months ago.It has 3 bedrooms, 3.5 baths, 2,500 square feet, a 25,000 square foot lot, frame exterior, and is in “excellent” condition.
The following adjustments are applicable:
House size:$50 per square foot;
Lot size:$1.25 per square foot;
Bedrooms:$4,000 each;
Half bathroom:$750 each;
Brick exterior:$4,500 more than a frame exterior;
Excellent condition:$3,000 more than “good” condition.
Using this information, what is the indicated value of the subject property using the sales comparison approach?
Let us calculate the adjustments -
Area Adjustment = (2800 - 2500) * 50 = $ 15,000
Lot Size = (20000 - 25000) * 1.25 = -$6,250
Bedrooms = (4-3) * 4000 = $4,000
Bathrooms = -$750
Brick Exterior = $4,500
Condition = -$3,000
Hence Indicated Property Cost = 185,000 + 15,000 - 6,250 + 4,000 - 750 + 4,500 - 3,000 = $ 198,500