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C: Sales that are located as close as possible to the subject property is another factor to look for to narrow down your search for good comps. The closer a sale is to the subject property, the more it is similar to the subject, as far as how any external advantages or disadvantages affect it. Some items you have to consider when evaluating the subject and any sales comps are: the school district it's in; tax structure of the area; the town it's located in; proximity to highways, shopping, employment, and entertainment; the income level of the area; is it located on a private road; etc.

The closer a sale is to the subject property, the more it is similar to the subject, as far as how any external advantages or disadvantages affect it.

For example, if the subject property is located near an airport, there will probably be some negative affect on market value. Negative impact on value is caused by the noise from the airplanes flying over the houses in the area. If you pick a sales comparable from an area that isn't affected by the airport noise, then you must adjust for this factor. You have to adjust for the superior location because the airport didn't affect the sales price of the comp. Another example could be a different school district or the amount of taxes between the subject property and sales comparable. You have to try to compare apples-to-apples all the time. If the subject is located in an area that has a lower quality educational system, or lower taxes than a sales comparable, then you must adjust for these factors. An adjustment is needed because these factors would have affected the sales price of the comparable property if it was located in the same area as the subject property.

It's often said that in real estate the three most important factors are Location, Location, Location. The reason for this is that you can take two identical houses and place them in two different locations and have a big difference in their market values. For example, let's say you took an average house for your area and placed it onto a vacant lot that was overlooking the ocean. Does the market value suddenly increase? You bet it does! That's why location is so important in real estate.

D: Sales that are as similar as possible to the subject property is something to look for to help you find good comps. The form appraisal reports list many different aspects you have to evaluate to determine how similar the comps are to the subject property. I'll go through the items listed on the back of the single family appraisal form and give you some descriptions to explain them in more detail. We have already discussed the first three items that are adjusted on the form: A: Sales or Financing Concessions, B: Date of Sale/Time and C: Location.

  • 1. Site/View - This refers to the topography and size of the site and the type of view there is from the site. Is the lot very hilly or is it relatively flat and does it have usable space? A very hilly lot will no be as usable to the homeowner as a flat lot. (Unless they like to roll giant snowballs down the hill). What size is the lot? If the lot sizes are different, then determine what adjustment is needed to compensate for this in the eyes of the typical buyer. If the lots are only slightly different in size, then an adjustment may not be needed. The reason for this is that the typical buyer may not lower or higher the purchase price due to a slight difference in two lots. What type of view does the property owner have? If one house overlooks a nice forest area and the other house overlooks a busy street, then an adjustment is needed.

  • 2. Design and Appeal - This refers to the style and appeal of the house. Is the house a Ranch style in an area of mostly Colonial style homes? The typical buyer will probably be looking for a house that conforms with the other homes in the area. What type of appeal does the house have? Is the overall design and appeal something that the typical buyer would find a nice home to live in or not?

  • 3. Quality of Construction - This refers to the type and quality of the construction of the house. Is the house built of brick construction in an area of mostly wood frame constructed homes? The typical buyer will probably be willing to pay more for a house made of brick or stone, as opposed to a wood frame structure. What is the quality of the construction? Is it something the typical buyer would find to be an overall well made home to live in or not?

  • 4. Age - This refers to the age of the house. Is there a significant difference between the age of the subject property and that of the comparable sales? The typical buyer will probably be willing to pay more for a house that is newer. If the ages are significantly different, then decide what adjustment is needed to compensate for this in the eyes of the typical buyer. If the ages are only slightly different, then an adjustment may not be needed. An adjustment may not be needed because the typical buyer may not lower or higher the purchase price due to a slight difference in age of the two houses. You can also account for a slight age difference by making an adjustment in the Condition section on the appraisal form, instead of adjusting for it in the Age section.

  • 5. Condition - This refers to the overall interior and exterior condition of the house. Is there a significant difference between the condition of the subject property and that of the comparable sales? The typical buyer will probably be willing to pay more for a house that is in "move-in" condition where no significant work is needed. If the conditions are significantly different, then determine what adjustment is needed to compensate for this in the eyes of the typical buyer. You won't have access to the interiors of the comparable sales because the owners of the sales comps don't have any interest in the appraisal of the subject property. They obviously don't want strangers knocking on their doors asking them to go inside, inspect their homes, take photos, measurements, etc. Just do the best you can with the data sources and information you have concerning the interior condition of the sales comps. You must at least view the sales comps on the outside from the street and take photos to evaluate the overall condition of the property.

  • 6. Above Grade Room Count - This refers to the room count of the house. The total number of rooms in a house refers to the rooms in the livable reas that are above grade. The total number of rooms does not include the bathrooms nor any rooms in the basement or attic. Bathrooms are counted and listed separately. Although the bedrooms are listed separately on the form, they are included in the total room count number. Is there a significant difference between the number of total rooms, bedrooms and bathrooms of the subject property, in relation to the comparable sales? The typical buyer will be willing to pay more for a house that has more total rooms, bedrooms and baths.

The total number of rooms in a house refers to the rooms in the livable areas that are "above grade."

If the room numbers are significantly different, then decide what adjustment is needed to compensate for this in the eyes of the typical buyer. If the room counts are only slightly different, an adjustment may not be needed. The reason for this is the typical buyer may not lower or higher the purchase price due to a slight difference in the room count of two houses. You can also account for a slight room count difference by making an adjustment in the Gross Living Area section on the appraisal form, instead of in the Above Grade Room Count section. Generally the difference in the number of bathrooms is adjusted for in this section. The difference in the total room count and the number of bedrooms is adjusted for in the Gross Living Area section.

  • 7. Gross Living Area - (No, this doesn't refer to a dirty, disgusting living area!) This refers to the total livable square feet of space inside the house. The gross living area, (GLA), in a house refers to the square footage in the livable areas that are above grade, which doesn't include the basement or attic areas. Is there a significant difference between the GLA of the subject property and that of the comparable sales? The typical buyer will probably be willing to pay more for a house that is larger. If the GLA's are significantly different, then determine what adjustment is needed to compensate for this in the eyes of the typical buyer. If the GLA's are only slightly different then an adjustment may not be needed. This is because the typical buyer may not lower or higher the purchase price due to a slight difference in size of two houses.

The gross living area, (GLA) in a house refers to the square footage in the livable areas that are "above grade," which doesn't include the basement or attic areas.

You need to estimate what standard GLA multiplier would be good to use for the local market. You can obtain this information from other more experienced appraisers that do appraisals in the local market area of the subject property and sales comps. You then multiply this figure by the difference between the GLA for each sales comparable as opposed to the subject property. This simplifies the adjustment process for the Gross Living Area in your comps. For example, let's say Sale #1 was 235 square feet larger than the subject and Sale #4 was 140 square feet smaller than the subject. Let's say you estimated that the GLA multiplier is $35 per square foot for the local market. Then the adjustment for Sale #1 would be $35 x (-235) = ‑$8,225 and the adjustment for Sale #4 would be $35 x (+140) = +$4,900.

  • 8. Basement and Finished Rooms Below Grade - This refers to whether there is a basement and/or finished lower level rooms in the house. These are areas that are below grade. This means that these rooms are 3/4 or more below the soil line on the exterior of the house. Is there a full or a partial basement? Is it completely finished, partly finished or unfinished? By saying "finished" it means that there are wall, ceiling and floor coverings in this room so that it can be used as livable space. The typical buyer will probably be willing to pay more for a full basement because they can use that area for a playroom, laundry room, etc. Also, if the lower level is finished with carpeting, sheetrock, outlets, etc. it will increase the market value of the house.

  • 9. Functional Utility - This refers to the overall flow of the interior rooms of the house or other functional items. Is there a significant problem with the functional layout of the subject property or with any of the comparable sales? The typical buyer will probably be willing to pay more for a house that has a typical room layout where no significant changes are needed. If there are functional problems with the house, then determine what adjustment is needed to compensate for this using an amount a typical buyer would account for. For example, a house that has a kitchen on the third floor can be considered to have a functional problem. The house has a functional problem because this type of floor plan is very uncommon and can be inconvenient for the occupants. Other examples of functional problems that you might encounter are: having no bathrooms on a floor where the bedrooms are located, or a floor of the home that has only one bathroom that can only be reached by going through someone's bedroom.

  • 10. Heating/Cooling - This refers to the type, age and condition of the heating and/or air-conditioning systems in the house. Is the house lacking a central air-conditioning system in an area where most homes have central A/C? The typical buyer will pay more for a house with central A/C and a newer heating system.

  • 11. Garage/Carport - This refers to the type, size and condition of the garage or carport of the house. A carport is just a small roof covering over the driveway area; it's not enclosed on the sides. Is the house lacking an enclosed garage in an area where most homes have them? The typical buyer will probably pay more for a house with an enclosed garage than one with just a carport. Also, a two-car garage is more desirable than a one-car garage due to the extra car and/or storage capacity for the owner.

  • 12. Porches, Patio, Pools, etc. - This refers to any porches, patios, swimming pools, decks, etc. on the property. Is the house lacking a pool or a deck in an area where most homes have them? The typical buyer will pay more for a house with a pool, porch or a nice deck, etc.

  • 13. Special Energy Efficient Items - This refers to any extra insulation installed, thermal windows, etc. in the house. Is the house lacking thermal windows in an area where most homes have these items? The typical buyer will pay more for an energy efficient house because it will save them money on utility bills. Newer houses have better insulation. Older houses sometimes have no insulation in exterior walls.

  • 14. Fireplace(s) - This refers to the number of fireplaces. Is the house lacking a fireplace in an area where most homes have them? Is there only one fireplace instead of several? The typical buyer will probably pay more for a house with a fireplace.

  • 15. Other (e.g., remodeling, kitchen equip.) - This refers to any other aspects about the house that have an affect on value that weren't covered in the other adjustment areas on the appraisal form. Is there a burglar/fire alarm system, a central vacuum system, etc.? Is the kitchen of the house modern or is it outdated? Are the fixtures and appliances modern or very old? The typical buyer will pay more for a house with a nice kitchen, bath, fixtures, etc. that have been upgraded and remodeled. Kitchens and bathrooms can have a BIG effect on many home buyers when they're looking at a house to buy.

See section APPENDIX D: COMPREHENSIVE VALUATION PACKAGE PROTOCOL on for more details and guidelines about how to evaluate and fill out the standard URAR appraisal form for FHA-insured mortgage loans.

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