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The comparative approach is based on the principle of a well-functioning active market. essence comparative approach is as follows: comparing data on similar transactions with the property being valued, taking into account the advantages and disadvantages of analogue objects in comparison with the object of assessment, as a result of this, the cost of analogues is adjusted by introducing appropriate amendments.
The comparative approach is used when there is reliable and accessible for analysis information about the prices and characteristics of analogous objects. In applying a comparative approach to valuation, the valuer should:
a) select the units of comparison and conduct a comparative analysis of the object of assessment and each object-analogue for all elements of comparison. For each analogue object, several units of comparison can be selected. The choice of units of comparison must be justified by the evaluator. The appraiser must justify the refusal to use other units of comparison adopted during the assessment and related to supply and demand factors;
b) adjust the values of the unit of comparison for analogous objects for each element of comparison, depending on the ratio of the characteristics of the object of assessment and the object-analogue for this element of comparison. When making adjustments, the appraiser must enter and justify the scale of adjustments and provide an explanation of the conditions under which the values of the adjustments introduced will be different. The scale and procedure for adjusting the unit of comparison should not change from one analogue object to another;
c) agree on the results of adjusting the values of units of comparison for the selected analogue objects. The appraiser must justify the scheme for reconciling the adjusted values of the units of comparison and the adjusted prices of analogue objects (clause 22 of FSO 1).
At the same time, an analogue object is understood as a real estate object that is close in its technical, legal, operational, economic and other factors to the object of assessment. At the same time, there are no absolutely identical properties in all respects. Therefore, there is a need for appropriate price adjustments for similar objects.
Data on comparable objects can be obtained on the basis of materials from the information and analytical publication "News of the Real Estate Market" ("Green Square"), the newspaper of free ads "From Hand to Hand" (Vsya nedvizhimost magazine), the Center system and a number of real estate agencies .
After selecting analog objects and identifying the main elements of comparison, it is necessary to conduct a comparative analysis of the object of assessment and each analog object.
Next, adjustments are made for the presence/absence of the selected comparison elements. When making adjustments, the following elements of comparison are used: transferred ownership, terms of financial settlements, terms of sale, time of sale, location, physical characteristics, economic characteristics, deviations from the intended use, the presence of movable property. At the same time, these adjustments are introduced in a certain sequence. The first four adjustments (for transferable ownership, financing terms, terms of sale and time of sale are exactly in that order!) are carried out in the following order: after each adjustment, the prices of analogous objects are recalculated anew. This method of making adjustments is called cumulative (that is, adjustments are made on a contingent basis). The rest of the adjustments can be made in any order (additive or independent).
In addition, adjustments are divided into percentage (coefficient) and cost (cash). Percentage adjustments are made by multiplying the selling price of the analogue or comparison unit by the percentage adjustment value. An example of percentage adjustments is adjustments for depreciation, sale time, etc. Cost adjustments can be of two types: relative (if adjustments are applied to the price of a unit of comparison - 1m 2 total area, 1m 3 of construction volume) and absolute (if adjustments are applied to the price of an analogue object as a whole). Cash adjustments are usually adjustments for the presence or absence of additional improvements (for example, the presence of a swimming pool or garage in a country house, etc.). Amendments can be positive or negative. If the analogue is worse than the object of assessment, then a positive adjustment is introduced, and vice versa.
In general, the following methods of comparative approach can be distinguished:
1. Methods of comparative analysis of sales.
2. Methods of mathematical modeling.
3. Expert methods.
TO methods of comparative sales analysis can be attributed:
− method of quantitative analysis of sales;
− method of qualitative (relative) comparative analysis;
− gross rent method.
When using the method of quantitative analysis of sales, the objects of analogues are compared according to the selected criteria and adjustments are introduced - percentage or cost. One way to determine value adjustments is to identify multiple comparable paired sales, that is, sales of two properties that are nearly identical except for one characteristic that needs to be valued in order to make the correct adjustment.
All types of adjustments must be justified.
Let's use an example to show the introduction of percentage and cost adjustments.
Example 8
Let's estimate the cost of an apartment with an area of 45 sq.m using the pair sales method. We present the calculations in the form of table 16.
Table 16
An example of calculating the cost of an apartment using the pair sales method
| Comparison elements | Analogues | ||||||||||||
| The cost of 1 sq.m. | 67 044,1 | 67 099,5 | 67 777,8 | 62 526,3 | 69 750,0 | ||||||||
| Ownership | Complete | Complete | Complete | Complete | Complete | Complete | |||||||
| Adjustment | |||||||||||||
| Adjusted Price | 67 044,1 | 67 099,5 | 67 777,8 | 62 526,3 | 69 750,0 | ||||||||
| Financing conditions | Cash | Cash | Cash | Cash | Cash | Cash | |||||||
| Adjustment | |||||||||||||
| Adjusted Price | 67 044,1 | 67 099,5 | 67 777,8 | 62 526,3 | 69 750,0 | ||||||||
| Terms of sale | Through RA | Through RA | Through RA | Through RA | Through RA | Through RA | |||||||
| Adjustment | |||||||||||||
| Adjusted Price | 67 044,1 | 67 099,5 | 67 777,8 | 62 526,3 | 69 750,0 | ||||||||
| Sale time | 03.09.2007 | 03.09.2007 | 01.09.2007 | 03.09.2007 | 03.09.2007 | 03.09.2007 | |||||||
| Comparison elements | Analogues | ||||||||||||
| Adjustment | +5 % | ||||||||||||
| Adjusted Price | 67 044,1 | 70 454,5 | 67 777,8 | 62 526,3 | 69 750,0 | ||||||||
| Location | Oktyabrsky district | Oktyabrsky district | Oktyabrsky district | Oktyabrsky district | Oktyabrsky district | Oktyabrsky district | |||||||
| Adjustment | |||||||||||||
| Adjusted Price | 67 044,1 | 70 454,5 | 67 777,8 | 62 526,3 | 69 750,0 | ||||||||
| Floor | 3/9 | 9/9 | 3/9 | 9/9 | 9/9 | 3/5 | |||||||
| Adjustment | 2676,7 | 2 676,7 | 2 676,7 | ||||||||||
| Adjusted Price | 69720,8 | 70454,5 | 70454,5 | 69 750,0 | |||||||||
| Number of adjustments | |||||||||||||
| Weights (assigned by experts) | 0,1 | 0,35 | 0,1 | 0,1 | 0,35 | ||||||||
Justification of the amount of adjustment at the time of sale:object analogue No. 2 was sold before the object of appraisal by two months. During these two months, the value of real estate increased by 5%. Let's introduce an upward percentage adjustment for object No. 2 in the amount of 5%. Then the adjusted cost will be equal to 67,099.5 * (1+5/100) = 70454.5 rubles.
Justification of the amount of adjustment per floor: analogues 2 and 3 have the same characteristics, except for the number of storeys. Therefore, the difference in the cost of 1 sq. m of objects is due to the difference in this factor. The adjustment for the floor is 70454.5 - 67777.8 = 2676.7 rubles. We will introduce an upward cost adjustment to objects No. 1, 3 and 4, since their position is worse relative to the object of assessment. The position of the objects of analogues 2 and 5 is comparable with the position of the object of assessment. No amendment required.
The agreed price for 1 sq. m will be 69720.8 * 0.1 + 70454.5 * 0.35 + 70454.5 * 0.1 + 65203 * 0.1 + 69750 * 0.35 \u003d 69 609.405 rubles.
The total cost of an apartment of 45 sq. m will be rounded 3 132 425 r.
At the same time, when coordinating the weights for analogous objects, they are set based on the number of adjustments made and their magnitude, since the most similar object will have fewer differences from the object being evaluated.
Using qualitative (relative) comparative analysis when analyzing sales, only the direction of adjustments is determined (up or down), then the prevailing sign and price range are determined for each analogue object. After that, the value of the appraisal object is calculated.
Gross rent method can be considered as a special case of the sales comparison method. It is based on the use of market information on the value of the gross rental multiplier (GRM), which is quantitatively equal to the ratio of real estate value to annual income.
The value of the property being valued is:
Vots \u003d A r * VRMav, (1)
where A p is the annual rent (potential annual gross income).
The gross rent method is applicable to the valuation of profitable real estate, widely sold on the market. Appraisers undeservedly forget about this method, but it is based on market information and is more reliable than, for example, the direct capitalization method. After all, the gross rental multiplier is calculated on the basis of market information (based on potential gross income), while the capitalization ratio is calculated taking into account some assumptions, assumptions (based on net operating income). In addition, this method requires fewer calculations, so the final result - the determined value - will be much more reliable.
Example 9
Let's estimate the value of the property using the gross rent method if the following information is known (Table 17):
Table 17
Similar information.
47. Types of adjustments in real estate valuation and the sequence of their application
An adjustment to comparable sales is necessary to determine the final value of the property being valued. Calculation and adjustments are made on the basis of a logical analysis of previous calculations, taking into account the significance of each indicator. The most important is the precise determination of the correction factors.
First, relative adjustments are made, then absolute and monetary.
Percentage (Relative) adjustments are made by multiplying the selling price of an analogue object or its unit of comparison by a coefficient reflecting the degree of differences in the characteristics of an analogue object and the object being valued. If the object being valued is better than a comparable analogue, then an increasing coefficient is added to the price of the latter, if it is worse - a decreasing one.
Cost Adjustments:
a) absolute corrections, made to the unit of comparison, change the price of the sold object-analogue by a certain amount, which evaluates the difference in the characteristics of the object-analogue and the object being evaluated. A positive correction is made if the object being assessed is better than a comparable analogue, a negative one, if it is worse;
b) monetary adjustments, contributed to the price of the sold analogue object as a whole, change it by a certain amount, in which differences in characteristics are estimated.
Cumulative percentage adjustments are determined by multiplying all individual percentage adjustments.
Amendment in form general grouping commonly used in developed real estate market, where there is big number sales. The cumulative adjustment is made within the selected group of comparable properties.
Amendment sequence:
1. Adjustment for funding conditions.
2. Adjustment for special conditions of sale.
3. Adjustment for the time of sale.
4. Correction for location.
5. Correction for physical characteristics
48. Methods for calculating the physical property depreciation, functional and economic obsolescence.Wear- characterizes the decrease in the utility of the property, its consumer properties with t.z. potential investor and is expressed in a decrease in value over time under the influence of various factors.
Depreciation is usually measured as a percentage, and depreciation is valued as depreciation.
Types of wear: physical, functional, external (economic)
Physical deterioration- gradual loss of the technical and operational qualities of the object, which were originally laid down during the construction, under the influence of natural and climatic factors, as well as human life.
Methods for calculating the FI of buildings:
1. normative (for residential buildings)
2. value
3. lifetime method
Normative method for calculating physical wear and tear involves the use of various normative instructions of the intersectoral or departmental level. As an example of such instructions, we can name the Rules for assessing the physical deterioration of residential buildings VSN 53-86 Gosgrazhdanstroy (State Committee for Civil Engineering and Architecture under GOSSTROY USSR. Moscow, 1990), used by the Bureau of Technical Inventory to assess the physical deterioration of residential buildings during technical inventory, planning the overhaul of the housing stock, regardless of its departmental affiliation.
The physical deterioration of the building should be determined by the formula:
, where - physical deterioration building, %; F i – physical wear of the i-th structural element, %; L i - coefficient corresponding to the share of the replacement cost of the i-th structural element in the total replacement cost of the building; n is the number of structural elements in the building.
For all its clarity and persuasiveness, it has the following disadvantages:
Impossibility to initially take into account, due to its “normativity”, atypical operating conditions of the facility;
the complexity of the application due to the necessary detailing of the structural elements of the building;
Impossibility to measure functional and external wear;
· subjectivity of specific weighing of constructive elements.
Cost method for determining physical wear and tear. Physical wear and tear at the time of its assessment is expressed as the ratio of the cost of objectively necessary repair measures to eliminate damage to structures, an element, a system or a building as a whole, and their replacement cost.
The essence of the cost method for determining physical wear and tear is to determine the cost of recreating building elements.
The depreciation calculation is based on a reasonable actual cost to bring worn items to “like new condition”, the result obtained as a result of applying this approach can be considered quite accurate. Among the disadvantages inherent in this technique, it is necessary to note the mandatory detailing and accuracy of calculating the costs of repairing worn-out building elements.
Determination of the physical wear and tear of buildings by the lifespan method. Based on the essence of the previously considered basic valuation concepts that characterize the total accumulated wear and tear of a building in terms of its operating time, it can be argued that physical wear, effective age ( calculated based on chronological age /from the date of commissioning to the date of assessment / taking into account its technical condition, which affects the cost of the object) and economic life ( the time of operation of the building, during which the object generates income) load-bearing structural elements are in a certain ratio. This ratio can be expressed by the following formula:
where AND(%)- depreciation in percent; EV- effective age, determined by an expert on the basis of the technical condition of the elements or the building as a whole; FJ- a typical period of physical life; OSFJ- the remaining period of physical life.
The percentage of depreciation of elements or the building as a whole calculated in this way can be translated into value terms (depreciation):
,
where I - wear in percent; BC - replacement cost.
functional wear. Signs of functional deterioration in the assessed building, as a rule, are the non-compliance of its space-planning and (or) design solution with modern standards, including various equipment necessary for the normal operation of the structure based on its current or intended use.
Depending on the physical possibility and economic feasibility of eliminating the causes that caused functional wear, it is divided into removable and irremovable.
The cost expression of functional depreciation is the difference between the cost of reproduction and the cost of replacement, since the calculation of the latter, according to the definition, obviously excludes functional wear from consideration.
COMPARATIVE APPROACH TO REAL ESTATE VALUATION
The comparative approach is based on the principle of substitution and is based on a very simple assumption: if, when evaluating an object, we find out that the same object has already been sold for a known amount, then it is quite logical to assume that the object being valued costs the same.
The key concept in the comparative approach is a similar object (analogue object), with which the evaluation object is further compared. An object-analogue of the object of assessment for the purposes of assessment is an object similar to the object of assessment in terms of the main economic, material, technical and other characteristics that determine its value.
The main characteristic for the object of assessment is the value of the transaction with it. If the appraiser does not have price information about an analogue object, then even its maximum similarity with the object of assessment will not be able to help in determining the value.
Considering that each property is unique, and also that pricing information is available for a very limited number of properties, the selected analogous objects will inevitably differ from the object of assessment, so the main point of the comparative approach is to answer the question: “How much would an object cost? analogue, if it had exactly the same characteristics as the object of evaluation?
The answer to this question is carried out by adjusting the prices of analogous objects for existing differences with the object of assessment.
Adjustments, also called adjustments, are positive and negative, absolute and relative.
The sign of the correction is determined depending on the ratio of the characteristics of the analogue object and the object of evaluation. If the analogue object is better than the object of assessment, then a negative correction is made, if the analogue object is worse, then a positive one.
Absolute amendments called adjustments measured in monetary units, relative adjustments measured in fractions or percentages.
When evaluating a property, one should adhere to certain amendment sequence . If all amendments are either relative or absolute, then the procedure for making amendments is as follows:
- Amendment to property rights.
- Amendment to funding conditions.
- Amendment to the terms of sale.
- Sale date amendment.
- Location correction.
- Corrections for other physical characteristics.
If both absolute and relative corrections are determined, then first relative corrections are made in this order, and then absolute ones.
In the process of real estate appraisal using a comparative approach, the calculation of the amount of adjustments can be made by various methods.
In this paper, we will use the analytical method of making corrections, which consists in the fact that the amount of the correction is determined by logical-analytical reasoning.
For example, if an apartment is being valued without a recent renovation, and the analogue object is an apartment with just completed repairs, then the repair allowance can be calculated by summing up the cost of carrying out a similar amount of work and the necessary building materials. The resulting value will act as a correction introduced into the analog object with a negative sign.
Within the framework of the analytical method, it is necessary to analyze what all the types of corrections listed above are and how one should approach their analytical definition.
Rights Amendment is made in cases where the object of assessment and the object-analogue are provided to their current users on different rights in rem. From a theoretical point of view, the selection of objects provided on a different right as analogues should be avoided, but due to the limited choice of objects of analogues, in practice, such objects are often not rejected.
The rights adjustment is the difference between the net income that is possible to receive with full ownership and with other rights, and is numerically equal to the present value of these losses for the entire period under consideration.
Amendment to financing conditions should reflect the differences in price caused by the unequal ratio of own and borrowed funds in the transaction.
Borrowing is carried out in two cases: when there is not enough available own funds to complete the transaction, and when there is a need to increase the profitability of the investor's (owner's) own funds without making changes to the object itself, the procedure for its operation, etc.
The effect of changing the profitability of own funds due to borrowing is called the effect of financial leverage or the effect of financial leverage.
Thus, the adjustment for financing terms is the difference in cash flows with a different ratio of own and borrowed funds and is numerically equal to the amount of financial leverage. In the domestic practice of real estate valuation, the adjustment for financing conditions is less common than in Western practice, because. in modern Russian conditions, the number of transactions involving borrowed funds is small.
Amendment to terms of sale is entered, firstly, in those cases when the offer or demand prices are used as price information about analogous objects, and secondly, under such special conditions as sale by installments, etc. The introduction of each of the special conditions of sale inevitably affects the price of the object.
The adjustment for the terms of sale is the difference in value when various conditions sales and is numerically equal to the discount on negotiation (case "deal-offer") or bringing all payments to date (case "direct sale-installment"). The value of the discount on bargaining is determined empirically and currently in the real estate market is 10 - 15%.
The need for amendments to the date of sale due to the fact that information about transactions with similar real estate, as a rule, dates back to past time periods. Moreover, there are frequent cases when the date of a transaction with an analogue object and the date of valuation are separated by a significant time period.
Therefore, the adjustment at the date of sale is a reduction to the time of valuation of transaction prices for similar objects.
The adjusted value of the analogue object is numerically equal to the future value of the specified sale price of the analogue object.
Correction for location property is due to the fact that often the location of the property is the main pricing factor of real estate.
The cost of absolutely identical objects located in different parts of the city can differ by a very significant amount. This is due to the fact that the concept of location is very broad and includes a competitive environment, engineering, social and transport infrastructure, prestige, etc.
It is because of this broadness of the term that the correction for location is the first of the physical corrections. This adjustment is a reflection of the influence of location on the difference in the cost of identical properties and is numerically equal to the difference in the average values of the respective territories or the capitalized difference in average incomes. The word "territory" can mean areas of the city, historically established areas, etc.
Corrections for other physical characteristics too individual to be reduced to some single algorithm.
It should be noted that each subsequent amendment is made to the price of an analogue object, adjusted taking into account previous amendments. After making all the amendments, the appraiser receives the adjusted prices for each of the selected analogues. To calculate the value of the object of assessment by the comparative approach, it is necessary to average the results obtained. If the difference between the minimum and maximum adjusted prices of analogue objects does not exceed 10%, then averaging is carried out using the arithmetic mean method. If the differences are more significant, then the value of the property is calculated as a weighted average. The reciprocals of the number of corrections are used as weights.
The source of information:
lecture material from the guidelines for the implementation of settlement and graphic work on the discipline "Evaluation of land and other real estate" / Associate Professor Ph.D. S.I. Komarov. - M.: GUZ, 2012. - 71 p. - chapter "Comparative approach to real estate valuation"
5.1. Comparative approach to real estate valuation.. 57
5.2. Methods of comparative approach 59
5.1. Comparative approach to real estate valuation
The fundamental principle of the comparative approach to real estate valuation is the principle of substitution. It says that if there are several similar objects on the market, a rational investor will not pay more than the amount, which will cost the acquisition of real estate of similar utility.
The principle of substitution also applies to income-generating properties. The typical information investor compares profitable properties for sale and also considers alternative investment options. Investors compare investment payback periods for various projects, rates of return, and capital investments under different options, taking into account tax advantages, management costs and other factors.
The following main stages of real estate valuation by a comparative approach can be distinguished:
1. At the first stage study the state and development trends of the real estate market and especially the segment to which the given object belongs. Real estate objects are identified that are most comparable to the property being assessed, which were sold recently.
2. At the second stage collects and checks information on analogue objects; the collected information is analyzed and each analog object is compared with the evaluated one.
3. At the third stage adjustments are made to the sales prices of comparable properties.
4. At the fourth stage the adjusted prices of analogue objects are agreed upon and the final value is displayed market value real estate object based on a comparative approach.
At the first stage of evaluation real estate using a comparative approach, the state of the real estate market and its development trends are studied, its segmentation is carried out and it is determined which market segment the property being valued belongs to. Further, in this segment, according to certain criteria, the objects that are most comparable with the one under study (analogue objects) are identified.
Market segmentation is the process of dividing the market into sectors (segments). The division occurs into sectors that have similar objects and subjects.
Objects must be similar in terms of intended use, quality, transferable rights, location.
Subjects must be similar in terms of solvency, funding opportunities, investment motivation.
Comparable objects must belong to the same segment of the real estate market as the appraised one; transactions with them must be carried out on terms typical for this segment. In particular, the following points need to be monitored:
Exposure time- this is the time that the object must be on the market in order to be sold. The exposition period differs for different market segments.
Independence of the subjects of the transaction. If the buyer and the seller are related, or are representatives of a holding company and an independent subsidiary, or have other interdependence and mutual interest, transactions between them are usually concluded without market price and data on them cannot be used for comparison.
Investment motivation. Investors should have similar motives, and objects should have similar best and most effective use. Thus, the purchase of a building for the purpose of organizing an office in it cannot be used as an analogue if the building is planned to be used as a hotel, because the expected income and expense flows will be different.
The main criteria for choosing comparable objects (analogues) are:
1) Ownership of real estate.
2) Terms of financing.
3) Conditions and time of sale.
4) Location.
5) Physical characteristics.
Different segments of the real estate market use different units of comparison.
Ground Comparison Units:
§ price per 1 ha;
§ price per hundred square meters;
§ price for 1 frontal meter:
§ price per 1 sq. m.
Comparison units for built-up areas:
Price for 1 sq. m. of total area;
Price for 1 sq. m. net area to be leased;
Price for 1 cu. m.
The gross rental multiplier or the common capitalization ratio can be used as an economic unit of comparison when evaluating projects based on the ratio of income and selling price.
Classification and essence of the amendments
Different methods of calculating and making adjustments for differences between the object being valued and a comparable analogue allow classifying the introduced amendments as follows:
Percentage adjustments, as a rule, are introduced by multiplying the sales price of an analogue object or its unit of comparison, a coefficient that reflects the degree of differences in the characteristics of an analogue object and the object being evaluated. In this case, the reasoning boils down to the following: if the object being evaluated is better than a comparable analogue, then a multiplying factor is introduced to the price of the latter. Otherwise, a reduction factor is applied to the price of a comparable analogue.
Percentage adjustments include, for example, an adjustment for location, wear, time of sale.
Cost adjustments
a) Monetary adjustments made to the unit of comparison (1 ha, unit of density, 1 weave) change the price of the sold object of the analogue by a certain amount, in which the differences in the characteristics of the object-analogue and the object being evaluated are estimated. The amendment is made positive if the object being assessed is better than a comparable analogue. Otherwise, a negative adjustment is applied to the comparable price.
The monetary adjustments made to the unit of comparison include a correction for the physical condition, as well as corrections calculated by statistical methods.
b) Monetary adjustments made to the price of the sold analogue object as a whole change it by a certain amount, in which the difference in the characteristics of the analogue object and the object being valued is estimated.
The monetary adjustments made to the price of the sold analogue object as a whole should include adjustments for the presence or absence of additional improvements (warehouse extensions, parking lots, etc.).
5.2. Comparative Approach Methods
Calculation and amendment
Many different methods are used to calculate and make adjustments, among which the following can be distinguished:
o methods based on the analysis of pair sales;
o expert calculation and correction methods;
o statistical methods.
Pair selling method
A paired sale means the sale of two objects, ideally being an exact copy of each other, with the exception of one parameter (for example, location), the presence of which explains the difference in the price of these objects. This method allows you to calculate an adjustment for the above characteristic and apply it to adjust the sale price of an analogue object comparable to the subject property for this parameter.
The limited application of this method is explained by the complexity of the selection of objects for a pair sale, the search and elaboration of a large amount of information.
Expert Calculation and Correction Methods
The basis of expert methods for calculating and making adjustments, usually percentage, is the subjective opinion of an appraiser about how much the object being assessed is worse or better than a comparable analogue.
Let's denote the value of the appraisal object - X, and let's take the selling price of a comparable analogue equal to - 1.0.
In this case, the reasoning boils down to the following:
1. The object is better than the analogue by 15%, then the price of the analogue should increase by the same 15%:
X = 1.0 + 15% x 1.0 = 1.0 x (1+ 0.15) = 1.15
2. The appraised object is 15% worse than the analogue, the price of the analogue will decrease:
X = % x 1.0 = 1.0 x (= 0.85.
3. An analogue is better than the estimated object by 15%. The price of the analogue should decrease:
1.0 = X + 15% x X = X(1 + 0.15), X = 1/0.87.
4. The analogue is 15% worse than the evaluated object. The price of an analogue should increase:
1.0 = X - 15% x X = X x (, X = 1/0.85 = 1.18.
Expert methods of calculation and adjustment are usually used when it is impossible to calculate sufficiently accurate dollar adjustments, but there is market information on percentage differences.
Statistical methods for calculating corrections
When evaluating real estate using the method of comparative sales analysis, in the process of making adjustments for differences between the property being valued and its analogue, it is not always possible to accurately calculate the probable price of the property. If you do not use such methods for calculating corrections, such as correlation and regression analysis, you should introduce as few adjustments as possible for differences in the characteristics of the compared objects. First of all, this concerns corrections for physical differences (in particular, corrections for scale).
The essence of the method of correlation-regression analysis is the admissible formalization of the relationship between changes in the prices of a real estate object and changes in any of its characteristics.
This method is time-consuming and requires a sufficiently developed real estate market for its application, since it involves the analysis of a large number of representative samples from the database.
Evaluation of projects based on the ratio of income and selling price
In this case, the following units of comparison are used as units of comparison:
1. Gross rent multiplier (GRM).
2. Total capitalization ratio (CCR).
1. Gross rent multiplier represents - the ratio of the selling price to either potential gross income (PVD) or actual gross income (ARI).
To use VRM you need:
a) Estimate the market rental income from the property being valued.
b) Determine the ratio of gross (actual) income to the selling price for comparable sales of the analogue.
c) Multiply the rental income from the property being valued by the BPM.
The probable selling price of the property being valued is calculated by the formula:
Tsob \u003d Dr x VRM \u003d Dr x Tsa / PVD;
where Tsob - the probable sale price of the property being valued;
Dr - rental income from the appraised object;
GRM - gross rental multiplier;
Tsa - selling price of a comparable analogue;
PVH - potential gross income.
BPM is not adjusted for convenience or other differences between the subject property and comparable peers, as BPM is based on actual lease payments and sales prices that already account for these differences.
The method is quite simple, but has the following disadvantages:
Can only be used in a developed and active real estate market;
Does not fully take into account the difference in risks or capital return rates between the subject of assessment and its comparable counterpart;
It also does not take into account the likely difference in net operating income.
2. Overall capitalization ratio
When using the general capitalization ratio, the process of determining the probable sale price of the property being valued can be represented as the following steps:
1. selection of comparable (including by risk and income) sales in this segment of the real estate market;
2. The overall capitalization ratio (GCR) is determined by the ratio of the net operating income (NOR) of a comparable analogue to its selling price:
Kcap \u003d CHODa / Tsa;
where Kcap - capitalization ratio;
CHODa - net operating income of the analogue;
Tsob \u003d CHODob / Kcap,
where Tsob - the probable price of the object of assessment;
CHODob - net operating income of the object of assessment;
Kcap - capitalization ratio calculated from market data for comparable analogues.
Analysis of the obtained calculations and the final conclusion on the probable price of the object using the comparative approach to real estate valuation
The final stage of the comparative approach in real estate valuation is the analysis of the calculations made in order to obtain the final value of the value of the object being valued. In this case, it is necessary:
1. Carefully check the comparable sales data used for the calculation and their adjusted values.
2. Reconcile the adjusted comparable sales figures by calculating the weighted average.
The weighted average calculated by the appraiser will be the probable sale price of the appraised object, which can be rounded within acceptable limits in each specific case.
Questions for self-control
1. What are the main units of comparison used in the comparative approach?
2. What are the main criteria for applying the pair sales method used in the comparative approach?
3. Is it possible to adjust the elements (characteristics) of the property being valued when modeling its value using a comparative approach?
4. What is the difference between quantitative and qualitative methods for calculating and making adjustments when applying a comparative approach? In what cases is it possible to use only qualitative methods of adjustments?
5. What number of comparable real estate objects is necessary and sufficient for the implementation of the method of analysis of paired data in a comparative approach?
6. List the advantages and disadvantages of the gross rental multiplier method.
7. What are the main statistical characteristics used in the comparative approach when preparing the initial market data and analyzing the adjusted sales prices of comparable properties in order to assess the reliability of the modeled value of the property being valued?
Test for current knowledge control
1. For which real estate objects, in the general case, is a comparative approach to assessing their value applicable?
a) an office building
b) sports palace,
c) both properties?
2. The firm purchased a land plot worth 2000 USD five years ago. e. and built a warehouse on it. The construction of the warehouse then cost the company $25,000. e. Currently, similar warehouses with similar sites in the area are sold for an average of 40,000 USD. e., and free (undeveloped) plots - for 3000 c.u. e. What is the market value of the warehouse (with land) built by the firm at the present time?
a) 40,000 c.u. e.,
b) 28000 c.u. e.,
c) 27000 c.u. e.
3. The appraiser identified three elements of comparison: location, market dynamics (date of sale) and conditions of sale (frequency of transactions). In what sequence should he make adjustments to comparable objects for these elements?
a) location, dynamics of transactions in the market, conditions of sale,
b) conditions of sale, price dynamics in the market, location,
c) dynamics of transactions in the market, conditions of sale, location,
d) in any order.
4. What requirements must the sold properties meet in order to be eligible for a comparative approach to determining the value of the property being valued?
a) the property must be of the same type,
b) the participants in the transactions had an objective idea of this market segment,
c) the participants in the transactions did not have any relationships that could affect the prices of the transactions,
d) market data on transaction prices are obtained from a person not interested in their distortion,
e) transactions are territorially "tied" (completed in one zone, district),
e) all of the above.
5. Which of the following types of real estate is best valued using the comparative sales method:
b) warehouses,
c) factories
6. What is the most appropriate unit of comparison when assessing land for the construction of an apartment building?
a) the total area of the plot of land, the number of acres,
b) the length of the street facade, m,
c) the number of apartments that can be built, rubles / apartment,
d) price per square meter of land, rub./m2.
7. What is the most appropriate unit of comparison when evaluating the cost of a car store?
a) price for a place for a car, rub./m2,
b) price per square meter of the total area of the building, rub./m2,
c) price per cubic meter of storage space, rub./m3,
d) price per square meter of the total area occupied by the store, rub./m2.
8. Adjustment for the elements of comparison is made when using the method of comparative analysis of sales:
a) from comparable objects to the evaluated one,
b) from estimated to comparable.
Comparison of the characteristics of analogues and the object being evaluated makes it possible to identify differences that affect the price and, therefore, require its change. For the correct modeling of the value of the appraised object, it is necessary to identify the type of adjustment, calculate its amount and correctly adjust the prices of analogues. The type of adjustment applied affects the procedure for calculating it and the adjustment process. Adjustments are made taking into account the comparison items listed above. To the extent that the property being valued differs from the comparable property, the latter's price needs to be adjusted to determine what price it would sell for if it had the same characteristics as the property being valued. The main rule for making adjustments is that when adjusting the actual sales prices of comparable objects, adjustments are made from the object of comparison (OS) to the object being valued (OO):
OS → OO.
The amendment form can be: - in absolute terms (rubles, dollars, euros); - percentage of the value of the compared objects; - fractions of a unit (used less often). Cash adjustments, or adjustments expressed in money, are amounts added (subtracted) from the sale price of each comparable item. Monetary absolute adjustments change the price of the analogue as a whole by a certain amount. This is a cost adjustment, the value of which does not depend on the number of comparison units. This amendment is made to the price of the analogue as a whole. An example of absolute monetary adjustments: an adjustment for the presence or absence of additional improvements (garage, pool, parking, etc.). Monetary relative adjustments change by a certain amount the price of a comparison unit of an analogue. The total value (sum) of adjustments applied to the price of a comparison unit for the object as a whole depends on the number of comparison units. An example of relative cash adjustments: an allowance for cosmetic repairs; corrections calculated by the method of correlation-regression analysis. Percentage adjustments change the price of real estate by a certain coefficient and are made by multiplying the adjusted price of the analogue by this coefficient. The percentage adjustment can be made both to the price of the analogue as a whole, and to the price of the comparison unit of the analogue. The total value of the correction to the object as a whole does not depend on the number of comparison units. Percentage adjustments, as a rule, are converted into monetary values, which are added to or subtracted from the price of an analogue object. Percentage adjustments are made for location, wear, time of sale. Percentage adjustments are used when it is difficult to determine exact amounts of money, but market data indicates that percentage differences exist. Pay special attention to signs. For example, when a comparable property is inferior to the property being valued, the actual sale price of the former should be increased to the value for which it would have been sold if it had better characteristics of the property being valued. The amount of the correction is taken based on how the differences between the compared objects will be evaluated by a typical buyer in the market. Therefore, any specific feature of an object is worth not as much as was spent on its creation or liquidation, but as much as it adds to the total market value of the property, that is, its contribution is evaluated. Thus, the amount of adjustment is a characteristic of the market reaction to the contribution of the considered component to the value of the property. The process of making amendments consists of the following steps: 1) identification (definition) of the elements of comparison that affect the value of the object of assessment; 2) comparing the elements of comparison in each specific case and measuring the difference between each object of comparison and the object of evaluation (for example, in percent); 3) determining the net (total) adjustment for each object of comparison and adjusting its selling price; 4) analysis of the adjusted values of all objects of comparison and a conclusion regarding the market value of the object of assessment. When carrying out the analysis in paragraph 4, the following concepts of the theory and practice of statistical methods are used: - arithmetic mean of the sample; - median - the middle value of the increasing sequence of sample values; - mode - the most common value among the indicators. So, on a cumulative basis, adjustments are made if the evaluator determines that each adjustment affects the others. The sequence of actions in this case: - corrections are determined in percent for each characteristic; - each correction is added (subtracted) from 100% and divided by 100%; - the resulting correction factors are multiplied among themselves; - the sale price of a comparable property is multiplied by the final adjustment factor. On an independent (plus/minus) basis, adjustments are made when it is well established that buyers in the market will evaluate adjustment characteristics independently of each other. The sequence of actions in this case: - corrections are determined in percent for each characteristic; - their percentage values are summed up (including signs); - the sale price of a comparable property is multiplied by the total percentage; - the sale price of a comparable property is adjusted by the value obtained, taking into account the sign by addition or subtraction. All methods for calculating adjustments can be divided into two categories: 1) quantitative; 2) quality. One of the signs of separation is the ratio of the number of pricing factors and the number of analogues used for evaluation. If the number of analogues k is greater than or equal to the number n of pricing factors increased by one (k ≥ n + 1), then quantitative methods are used for evaluation. If the number of analogues k is less than the number n of pricing factors increased by one (k< п + 1), то для оценки используются качественные методы. Quantitative methods include: 1) paired sales analysis - two market sales are compared to determine the adjustment for one comparator and its contribution to value (two sales that differ in only one comparator); 2) statistical analysis - when a large amount of data makes it possible to calculate the value of the adjustment; 3) graphical analysis - for example, cost calculation land plots when approaching the city limits; 4) trend (Trend - identified long-term trend analysis - identifying market trends based on the analysis of a large amount of market information; tracking market trends by any parameters; 5) analysis of secondary (indirect) data describing not comparable transactions, but general market data with indication of the source of information; 6) sensitivity analysis, costs, capitalization of rental differences, etc. Quality methods include: 1) relative comparative analysis - a qualitative classification analysis of the relative similarity of compared objects without calculating exact adjustments, but using standard quality terms, for example, a qualitative scale of the form: - much better, - much better, - slightly better, - equal, - slightly worse, - much worse, much worse. Qualitative classification this kind is often used in combination with quantitative methods; 2) the general grouping method - when there are many similar sales with a narrow range of prices in an active market, for example, plots in horticulture. The appraiser does not make individual adjustments, but compares the property as a whole to determine whether it is better or worse than each of the comparable properties. Then, within the selected group, an aggregate grouping is performed. Thus, there is no need to separately consider each feature; 3) the method of personal interviews - is used for an active market and simple objects and consists in conversations with specialists (lawyers, district architects, managers, etc.); 4) method of expert assessments (rank analysis), etc. When making adjustments, follow the rules- if the total correction is less than 5%, then it can be neglected; - if the total correction is more than 25%, then this object of comparison should be excluded from consideration and a more comparable one should be selected, if possible. The method of analysis of paired sales allows you to calculate the correction based on a comparison of the prices of objects with a given difference in characteristics. A paired sale is the sale of two objects that are similar in parameters in all but one characteristic for which an adjustment must be calculated. Price comparison allows you to calculate the amount of adjustment and apply it to other objects of a particular market segment.
Median - the median value of a monotonic sample - 1500, 2000, 2000 (median), 2300, 3000.
Mode is the most frequently occurring value. Equal to 2000 dollars. Thus, the adjustment for the presence of a garage is $2,000.
Define:
1) adjustment for difference in area;
2) adjustment for the presence of a garden;
3) adjustment for the presence of a garage.
Example 12.4. Based on the results obtained, determine the market value of the villa "At Three Stones" with an area of 250 m 2, with a garage, but without a garden.
1) OO differs from OS2 only in area:
250 - 150 \u003d 100 m 2;
2) determine the amount of adjustment for the difference in area:
260x 100 = $26,000;
3) adjusted selling price of OS2:
30,000 + 26,000 - $56,000
Therefore, the market value of the villa "At the Three Stones" is $56,000.
Consider the application of one of the qualitative methods - relative comparative analysis.
Relative comparative analysis consists in dividing all objects of comparison into two groups. The first group includes objects that are superior in their characteristics to the object of assessment, and the second group includes objects that have lower quality characteristics than the object of assessment. Thus, the price range of the probable value of the appraisal object is allocated.
The method is used in conditions when it is impossible to analyze a paired data set.
As follows from the definition, the method is used to compare only the characteristics of objects, adjustments for the first group of comparison elements should already be made.
Thus, in order to evaluate an object, it is necessary to compare its qualitative characteristics and characteristics of analogues. To do this, it is necessary to evaluate the qualitative characteristics of objects.
Evaluation of the quality of objects is a measurement process (attributing numbers to the qualitative characteristics of an object in accordance with certain rules), which can be defined as a procedure for comparing characteristics according to selected indicators (features). Three concepts are included in this definition - characteristic, indicator and comparison procedure.
If the levels of a factor can be expressed quantitatively (in rubles, dollars, percent, square meters, etc.), then such a factor is called quantitative, but if the levels of the factor cannot be expressed by a specific number, then such a factor is called qualitative.
An example of a quantitative factor is such a characteristic of real estate as the area of the object, and a qualitative one is its condition. Of course, the state of the building can be expressed as a percentage of wear and tear according to the technical inventory, but a number of objects, for example land, from the point of view of evaluation, they do not wear out, but they can differ greatly in quality in form, accessibility, etc.
Factors can also be conditionally divided into discrete and continuous. Discrete factors are understood as having a certain (most often small) number of levels. Factors whose levels form a continuous set are called continuous.
The area of the object in this gradation looks like a continuous factor. Discrete factors include the presence of a balcony in the apartment (no, one, two).
All this leads to some general principles, universal scales by which the levels of factors can be classified.
The following types of scales are most commonly used in measurement practice:
Nominal (name or classification scales);
Ordinal;
Interval;
Relationship scales;
Nominal scales are used to describe the belonging of objects to certain classes. All objects of the same class are assigned the same number. Factors in this case are formalized in the form of binary estimates of two levels: 0 and 1. Such a scale is also called binary.
Ordinal scales allow you to establish equivalence and dominance. Numbers (codes) only allow you to determine the order of objects and do not make it possible to say how much or how many times one object is preferable to another. The simplest example of coding on such a scale: better, worse, equivalent.
Interval scales allow you to reflect the magnitude of the difference between the properties of objects. The simplest example is measuring the wear and tear of a building as a percentage. The main property of such a scale is the equality of intervals. The interval scale can have arbitrary reference points and scale. The main advantage of the scale is that it allows you to fix the relationship "how much better" and "how much worse".
Relationship scale- a special case of the interval scale, when 0 is taken as a reference point. With this coding, the ratio of any two points of the scale does not depend on the unit of measurement. Therefore, this scale allows you to determine the relationship "how many times better" or "how many times worse".
Less commonly used scales include such varieties of the interval scale as the difference scale (single scale) and the absolute scale (zero reference point and unit scale).
It should be noted that as a result of this or that assessment, there is a need for a qualitative and quantitative comparison of factors with each other. The incommensurability of factors among themselves is explained, as a rule, not only and not so much various units measurement, but also by the fact that each factor, expressing a certain property, is at the same time an assessment of the attitude of experts to this property.
If it is necessary to make a decision taking into account many factors, then all their diversity, as a rule, leads to an unambiguous complex assessment, and the monetary assessment is the most common and convenient.
Price range: from 43 to 50 dollars. for 1 m 2 of the plot (extreme values are discarded).
Evaluation using ranks. The employees of the company conducted an expert survey on the influence of various factors on the cost of 1 m 2 of land
site. A total of 16 experts were interviewed. For land plots, the NEI of which is the construction of a standard apartment building 600.11 series, the following responses were received:
The price range for 1 m 2 is the same: from 43 to 50 dollars, but it is clear that in terms of its quality characteristics, the object of assessment is closer to analogue 2.
The quality scale used here, with missing steps restored:
Better - $618,000;
A bit better -
Equal (OO) -
Slightly worse - $612,000;
Worse - 610,000 dollars.
It is easy to see that the adjustment for one quality level is 2000 dollars, therefore, the value of the object being appraised is 614,000 dollars.
Quite often in valuation practice, the analysis of market statistics data is used. The most commonly used correlation-regression analysis. With its application, you can get good results if you have a good database. At the same time, the effectiveness of the method is largely related to the number of comparison elements: the more factors affect the price of a property, the more representative the database should be.
The basis of the expert method is the appraiser's subjective decision on how the analyzed parameter affects the price in percentage terms. As a rule, those objects are analyzed, the discrepancy between the parameters of which and the object being evaluated does not lead to a deviation in value by more than 30%.
The order in which comparables are adjusted is determined based on an analysis of market information about transactions. Table 12.2 provides an example of an adjustment sequence where percentage adjustments are applied to the price of a comparable property to account for how much it outperforms (underperforms) the property rights transferred, financing terms, terms of sale, market conditions, location, economic characteristics, type of use, and other components.
One important remark should be made. Determining market value as one of its conditions presupposes the existence of an open and competitive market. Since the real estate market in Russian reality is not such, and the information market for some segments of the real estate market is not only opaque, but completely closed, the appraiser is forced to use not only information on transactions, but also data on the prices of offers for sale.
However, sales prices and offer prices, as is known from pricing, differ in the bargaining component, trade margin, intermediary margin, etc. can track by changing the listing data. Therefore, this difference should be taken into account before making any subsequent adjustments, since all price characteristics must have a homogeneous structure for adjustments to be made.
Attributing this procedure to amendments to the terms of sale or to market conditions is methodologically incorrect, since it does not express either the peculiarities of the motivation for the transaction, or the change in market conditions over time, which determine these amendments.
