In: Finance
Mr. Lowry wants to appraise the value of his home by the Direct Market Comparison Approach. The following information has been gathered about three recent sales in his neighbourhood..
Subject Property |
Sale #1 |
Sale #2 |
Sale #3 |
|
Sale Price |
$875,000 |
$820,000 |
$779,000 |
|
Sale Time |
Recent |
3 months ago |
3 months ago |
|
Lot Size |
50’ x 110’ |
55’ x 100’ |
55’ x 110’ |
45’x 105’ |
House Size |
3,000 s.f. |
3200 s.f. |
3,000 s.f. |
3000 s.f. |
Washrooms |
3 |
2 |
3 |
1 |
Fireplace |
Yes |
Yes |
No |
Yes |
Finished Rec Room |
Yes |
No |
No |
Yes |
Walkout basement |
No |
Yes |
Yes |
Yes |
Air Conditioning |
Yes |
Yes |
No |
No |
Other Information of Mr. Lowry’s property is given as follows;
Projected price increase per
month
2%
Projected increase
started
6 months
Land value per frontage
foot
$3,500
Space cost per foot
($1,000/100)
$10.00
Air
conditioning
$4,000
Fireplace
$5,500
Finished recreation
room
$10,800
Washroom $8,000
Walkout basement $10,000
Required: Estimate the appraised value of Mr. Lowry’s home.
Mr Lowry's house would be appraised based on the value of #Sale 2 which took place 3 months back (with necessary adjustments). We have take #SALE 2 for appraisal because its Lot size and House size are same as that of Mr Lowry.
Mr. Lowry's house has additional Fireplace, Finished Recreation room and Air Conditioner, so will be add value of these items to the sales value of #SALE 2
Mr Lowry's house does not have Walkout basement, so will reduce its value from the sales value of #SALE 2
Sales value of Mr. Lowry's house (3 months back ) = Sale price of #SALE 2 + Value of Fireplace + value of Finished Recreation room + value of Air Conditioner - value of walkout basement
Sales value of Mr. Lowry's house (3 months back )c= $8,20,000 + $5,500 + $10,800 + $4,000 - $10,000
Sales value of Mr. Lowry's house (3 months back) = $ 8,50,300
We are given that projected price increase per month is 2% of previous months' price
Therefore, value of Mr Lowry's house today = $8,50,300 * (1+0.02)3
value of Mr Lowry's house today = $9,02,345 (approx)
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