Paired analysis

• Provides market evidence for amount and direction of a particular adjustment

• Pair only two sales for the adjustment and check them against other sales

• Appraiser has to use some judgment “but judgment without market evidence is simply not acceptable appraisal practice.”

Impact of a paved road; Sale A on paved and Sale B on dirt

Paired Comparison

• $50 per acre impact from the paved vs dirt road

• Appraiser will keep checking this amount as they find sales that let them make the comparison

• Once one adjustment has been ‘proved’ in the market it can be used for other comparisons

• Assume two similar sales except location and size

Size Comparison

Size comparison

• Adjustment is $100 per acre assuming that the adjustment of $50 for location holds

• Next is time adjustment• Remember with time adjustment that the

percentage adjustment is a reflection of compounding too

• Sale two years ago at $1000, next year at $1,100 and this year at $1,200 What’s the percent change due to time?

Market conditions (time)

Market conditions (time)• What is the percentage change due to time?– $880 - $950 = -$70• -$70/950 = -7.4%/1.5 = -4.9%

• Sale 1 yr. ago for $600,000• Sale this yr. for $742,000 but property had

$65,500 in improvements

Comparison• Sale A: 160 Ac. on Hyw. 6, two miles from

Growthville, all Class II soils, no improvements, sold 1 year ago for $1,200, Cash

Steps• First thing to do is to find a control sale. This

is the sale as similar to the subject property as possible.

• Comparisons will be made to this sale • Assume that we are interested in finding the

market contribution of location using these sales.

• Time adjustments have to be made first• Which is the most like the subject?

Pairs for Location

Pairs for Location

Pairs for Location

Improved land• Appraisal of improved land starts with

determining the value for each land class through evaluating sales of unimproved land

• These land classes will then be used to determine the value of the land to the sale and the residual will be the value of the improvements

• The value of the improvements will then be allocated among the buildings, etc.

Value of the land classes• Assume that the appraiser knows that

unimproved sales indicate this division for each land class– Class I 100%– Class II 60%– Class III 40%

• What is the value of each land class if we had a sale for $260,000 with 100 acres of Class I, 200 acres of Class II and 100 acres of Class III.

Land class example• Class I 100%, Class II 60% and Class III 40%• 100 ac. Class I, 200 ac. Class II, 100 ac. Class III• $260,000 sale price• 100 * 100% = 100• 200 * 60% = 120• 100 * 40% = 40

260$260,000/260 = $1,000 Class I $1,000 * .60 = 600 Class II $1,000 * .40 = 400 Class III