1. Suppose you have a subject property with a 105,000 sq. ft. lot and existing i
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Question
1. 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?
2.You are attempting to arrive at what the monthly rate of change that has recently occurred in the real estate market. In doing some market research, you find two properties that have sold twice within the last two years. Property A sold 22 months ago for $98,500; it sold last week for $108,000. Property B sold 20 months ago for $105,000; it sold two weeks ago for $113,500?
Explanation / Answer
1)
Lot value of 110,000 sq ft = $250,000
So Lot value of 110,000 sq ft = $250,000 - 5000 * $1.75 = + $241,250
Construction Cost = + $2, 500, 000
Physical deterioration = - $400,000
functional obsolescence = - $50,000
External obsolescence = - $50,000
total value of the property = $2,241,250
2)
P [t=-22]= $98,500
P [t=0] = $108,000
108,000 = 98,500 (1+r)^22
r1= 0.419%
P [t=-20]= $105,000
P [t=0] = $113,500
113,500 = 105,000 (1+r)^20
r2 = 0.39%
To get Combined property rate change
We will calculate the price of property 1 20 months ago
P [t=-20] =P[t=-22] (1+.419%)^2
P [t=-20] = $99,411.12
Combined property rate change
$108,000 + $113,500 = ($99,411.12 + $105,,000) * (1+r)^20
r = 0.402% is the answer.
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