In: Finance
Given the following sales adjustment grid, what adjustment would be made for size? ( Please show all your work)
Characteristics |
Subject |
Comparable 1 |
Comparable 2 |
Comparable 3 |
Comparable 4 |
Sales Price |
116,000 |
120,000 |
124,000 |
126,000 |
|
Square feet |
1800 |
1700 |
1900 |
1900 |
1900 |
Exterior |
Alum |
Brick |
Alum |
Alum |
Brick |
Age |
16 |
20 |
20 |
18 |
20 |
Please find below the original problem statement and solutions for the same
Explanations for the each step follows:
Step1:
Taking Comparables 1 and 4,Brick exterior and same age we have sale price for 1700 and 1900 sqft,we find out the sale price for 1800 sqft by taking average of 116000 and 126000 which is 121000 (average of 1700 and 1900 is 1800)
Step2
Taking comparables 2 and 4,all are same except the material
sale price difference is 6000 between brick and alum for an area of 1900 sqft
per sqft sale price difference is (6000/1900)
we have to find 1800 sqft,for 1800 sqft difference will be = (6000/1900)*1800= 5684.21 in sale price(alum will be less than brick)
hence 1800 sqft alum made with age 20 sale price would be= 121000-5684.21= 115316
Step3
all being same only age difference between alum made (less age is costlier) but for 1900 sqft
taking comparable 2 and 3 with all alum made and same area there is a difference of 4000 for 2 years age difference
for 1900 sqft sale price difference is 4000( 124000-12000)
for 1 sqft price difference will be (4000/1900)
for 1800 sqft price difference would be (4000/1900)*1800= 3789.47 for two years(20-18)
here subject product is another two years younger(18-16),price will go up similarly = 3789.47
Final price of the subject would be = 115315+3789=119105 (ignoring the decimels)
Please note that all costing has to come to the per sqft basis and per year basis
Hope the answer helps,thanks.