Suppose you have a subject property with a 105,000 sq. ft. lot and existing impr

Question

Suppose you have a subject property with a 105,000 sq. ft. lot and existing improvements for which you estimate the reproduction cost new to be $2,500,000, physical deterioration to be $400,000, functional obsolescence to be $50,000, and external obsolescence to be $50,000.

If you have information on a comparable lot of 110,000 sq. ft. which recently sold for $250,000 and the only adjustment is $1.75 per sq. ft. for the difference in lot size, what is the indicated total value for the subject property.

Explanation / Answer

Part 1

Cost Approach

Existing property 105000 sq. ft. All Amounts in $

Reproduction cost 2500000

Physical deterioration 400000

Functional Absolescence 50000

External Absolescence 50000

Total cost 3000000

Part 2

Coparable property 110000 sq. ft.

Adjustment Rate $1.75 / sq . ft.

Total value for the subject property

Cost $3000000

Add : Adjusted Amount $192500

Total value of the property $3192500

Working note:

Calculation of adjusted amount for the difference in lot size

=110000 * $1.75/sq.ft.

=$192500

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