Question

In: Finance

You have been asked to estimate the value of a home for sale. The subject property...

You have been asked to estimate the value of a home for sale. The subject property has three bedrooms, two bathrooms, and is in good condition. A highly comparable property just sold near the subject recently.

The comp sold for $127,900. It has three bedrooms, one bathroom, and is in good condition.

Assume bedrooms are worth $4,500 and bathrooms are worth $2,700.

What is the indicated value of the subject based on the comparable sale? (please show all work below for full credit:)

Solutions

Expert Solution

Answer-

Given

Comparable selling value = $ 127900
Fixed cost + 3 bedrooms + 1 bathroom = $ 127900 [ bedrooms and bathroom are variable costs]

Cost of 1 bedroom = $ 4500
Cost of 1 bathroom = $ 2700

Cost of 3 bedrooms + 1 bathroom = 3 x $ 4500 + 1 x $ 2700 = $ 13500 + $ 2700 = $ 16200

Fixed cost = $ 127900 - $ 16200 = $ 111700

Given

The subject property has three bedrooms, two bathrooms, and is in good condition

Cost of Subject property = Fixed cost + 3 x bedroom cost + 2 x bathroom cost

Cost of subject property = $111700 + 3 x $ 4500 + 2 x $ 2700
Cost of subject property = $ 111700 + $ 13500 + $ 5400
Cost of subject property = $ 130600

Therefore the cost of subject property based on comparable sale = $ 130600

jeff jeffy answered 2 years ago
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