Example of the Adjustment Process
Go Back
Below is a very simplified example showing the idea behind adjustments in the Comparative Sales Approach. The actual process is much more detailed and based on in-depth market research and analysis by the Appraiser. The Appraiser's skill at market research and analysis is the chief commodity for which the client pays.
The market value of a house is not in the wood and the paint. It is the amount an informed public is paying for properties at this time and in this place.
We all know that a 1200 square foot, 10 year old, good quality rancher on a 10 000 square foot lot with all municipal amenities in a dying mill town in north coastal BC is most certainly not going to sell for the same price as exactly the same house and lot in Oakridge or Oak Bay. That is why it is vital that a local appraiser with comprehensive local knowledge be consulted.
You want to sell your house at a maximum price in a minimum of time. How do you know what price to expect for it? Let's find out what an informed buyer has paid for a nearby house like yours and start there.
A nearby house very much like yours just sold for $10 000. The market value of your home should be more or less the same - so let's calculate how much more or less, and when we are done, we will know the value of your house.
|
 |
Subject Property (Your House) |
Adjustments to Comparable #1 |
Reason for Adjustment |
If your house were for sale at the same time as the Comparable, we know that its value should be about $10 000. That is its market value, regardless if it is for sale or not.
|
Base Value
$10 000
(the base price a buyer should be willing to pay)
|
This house sold on the open market for $10 000. The Market Value of this house is exactly $10 000.
|
The local market has been on a rise of 2% per month for the last year.
|
+$400
|
Sold 2 months ago. Adjust the base value up to account for market increase.
|
Desirable location, average size lot. |
$0
|
Similar location. Similar sized lot. No adjustments.
|
| 35 years old, average condition, 1180 sq feet up, 1220 sq ft down, 4 bedrooms, 2 baths, no basement, fireplace. |
$0
|
34 years old, 1200 sq feet up, 1200 sq ft down, 4 bedrooms, 2 baths, no basement, fireplace. No adjustments.
|
| Fully renovated bath and kitchen 4 years ago. |
$0 |
Fully renovated bath and kitchen 3 years ago. No adjustments.
|
Double garage, landscaped yard, front and rear decks, no fence. |
– $200 |
Double garage, landscaped yard, front and rear decks, fully fenced. The value of this fence is about $200 so adjust the sale price down for this asset that your home lacks.
|
New roof. The roof on your house won't have to be replaced for many years. Your house is worth more because it has a better roof and will save money. |
+ $300 |
10 year old roof.
Roofs depreciate at about $30/year. Adjust the base value up for money your house will save a buyer.
|
The final estimate of value is NOT the value of the Comparable even though it appears in the Comparable column. The value of the Comparable is still $10 000.
We used the Comparable to find an estimate of value for homes like yours.
|
Final Estimate of Value
$10 500
(The value of your home compared to the Comparable)
|
If a well-informed buyer were to come along today, this is what she would be willing to pay for your home compared to others that have sold recently.
We used the Comparable to find a base value for homes like yours. Once all the adjustments are made - we have an estimate of what your house is worth to an informed and motivated buyer.
|
This is how the above looks in the report's adjustment grid.
|
| Go Back |
|
