SALES COMPARISON APPROACH
PROCEDURE: 3) Select relevant units of comparison
(e.g., dollars per acre, dollars per sq. foot) and develop a comparative analysis for each unit.
UNITS OF COMPARISON...
-Each sale price should be stated in terms of appropriate units of comparison. -Agricultural properties generally are compared by per acre price for crop land and rangeland. Rangeland may also be compared by animal units. -Residential properties are usually compared by the price per sq foot or gross living space. -Adjustments for elements of comparison can be made in either total property price or to the appropriate unit of comparison.
MARKET CONDITIONS..
-Market conditions vary with time. -The market price may have remained stable, decreased, or increased between the time of the comparable sale and the present time. -The change in the price level is usually expressed in a rate (percentage) of change over a time interval - month, year, etc. -The rate may reflect a compound change, average change, or aggregate change per period.
SALES COMPARISON APPROACH
-The process in which the market estimate is derived by analyzing the market for similar properties. -A major premise of the sales comparison approach is that the market value of a property is directly related to the prices of comparable, competitive properties. -The focus is on similarities and differences among properties and transactions that affect value.
LOCATION...
-When properties are within the same general rural region, location does not usually have a major impact on value. -Proximity to towns, location on improved roads, and distance to sources of farm supply products may affect the value due to location. -Location is a factor in highest and best use determination
Basic elements of comparison: (8 of them)
1) real property rights conveyed. 2) financing terms 3) conditions of sale 4) market conditions 5) location 6) physical characteristics 7) economic characteristics 8) use
Land features and improvements include: (4 of them)
1) soil type 2) water -irrigation and stock water 3) topography - slope 4) improvements to the land such as terraces, water ways, tail water pits, irrigation systems, etc Size of the property is frequently a significant physical variation. Building improvements are considered a physical characteristic and require adjustment.
The time adjustment combines two factors:
1) the change in the relative desirability of the property. 2) the change in the purchasing power of money, inflation or deflation.
INCOME (ECONOMIC) CHARACTERISTICS...
For agricultural properties the major income characteristic is the productivity of the land and is often considered in the characteristics.
PHYSICAL CHARACTERISTICS...
Physical characteristics account for the most extensive comparisons among rural properties.
ELEMENTS OF COMPARISON...
The characteristics of properties and transactions that cause the prices paid for real estate to vary.
PROCEDURE: 2) Verify the information
by confirming that the data obtained are factually accurate and that the transactions reflect arm's length market considerations. Verification may also elicit additional information about the market.
PROCEDURE: 5) Reconcile the various value indications
produced from the analysis of comparables into a single value indication or a range of values.
PROCEDURE: 1) Research the market
to obtain information on sales transactions, listings, and offers to purchase or sell properties that are similar to the subject property in terms of characteristics such as property type, date of sale, size, location, and productivity.
PROCEDURE: 4) Compare comparable sale properties
with the subject property using the elements of comparison and adjust the sale price of each comparable appropriately to the subject property or eliminate the sale property as a comparable.