Question

In: Operations Management

A subject property has 2,800 square feet, 4 bedrooms, 3 baths, a 20,000 square foot lot,...

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?

Solutions

Expert Solution

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


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