comparable information.For example: Comparable 1 sold

Chapter 7 Sales Comparison Approach - Principles and Data Sources Flashcards Relative Comparison Analysis ProcedureContinuing with the procedure for relative comparison analysis, after the comparable sale property is compared to the subject and assigned plusses (+) and minuses (-), then the plusses and minuses are summed up to give an overall rating for each comparable property. The subject is then valued (perhaps with a range of value rather than a single-point indication of value) in comparison to the

comparable information.For example: Comparable 1 sold

for $400,000 and is greatly superior to the subject; Comparable 2 sold for $250,000 and is significantly inferior to the subject; Comparable 3 sold for $300,000 and is slightly inferior to the subject. Based on qualitative analysis, the indicated value for the subject would probably be in the range of $300,000 to $350,000.Here's an example of how the adjustment process is employed.Here's an example of how the adjustment process is employed. The subject is a three-bedroom home that is 15 years old. It has a brand new kitchen. The comparable is a similar house in the same neighborhood, also 15 years old, but with its original kitchen. Through market research and analysis, we determined that new kitchens in this market area have a contributory value of $12,000. The comparable

sold for $200,000. The subject is therefore worth:$200,000

• $12,000 = $212,000.Look easy? Well, it is, in theory. The

process gets more complicated, however, when it comes time to determine appropriate amounts associated with various adjustments. And there can be lots of them! You'll learn how to extract and support adjustments later in this course.A market area is defined as"The geographic region from which a majority of demand comes and in which the majority of competition is located.Depending on the market, a market area may be further subdivided into components such as primary, secondary, and tertiary market areas, or the competitive market area may be distinguished from the general market area." VerificationAs you are collecting data, you will simultaneously be checking that it is reliable. Do this by double-checking facts, getting second opinions, talking with neighbors, and asking questions whenever facts seem a little funny.Determining the buyer's and seller's motivation in a transaction is a good way to test data. Any type of duress,

whether on the part of the buyer or seller, can impact the sales price of property. Maybe the seller was transferred to another state, and needed to sell the home in a hurry. Or perhaps a divorce forced a hasty sale. Maybe the buyer had to purchase by a certain deadline in order to take advantage of tax incentives. Or parents sold their property to help their daughter, charging a ridiculously low figure and requiring no down payment. Or the sale was done privately, without advertising in the open market. Or the buyer was unaware that the property contained asbestos in the ceiling. All of these could impact the sale price and make it unsuitable as a comparable.In a market value appraisal, an appraiser must verify that transactions can be considered "arm's-length", i.e., the transaction was made in an open market over a reasonable amount of time, between unrelated parties, neither of whom was under duress to buy or sell, with typical financing, and both buyer and seller were aware of any defects.Do a common-sense test too. Does a sale seem "fishy" in any way? Is there something in your gut that tells you a sales price just isn't right? Trust your instincts and dig further, going over your data until you're positive that it's both accurate and appropriate.Qualitative analysis is defined as"The process of accounting for differences (such as between comparable properties and the subject property) that are not quantified; may be combined with quantitative techniques."Qualitative analysis is used for elements that cannot be given a numerical value. For example, it may be

difficult to put a dollar value on the difference between differing qualities of construction when data is limited.Similarly, you can't quantify the information given to you in an interview, or the nuances involved in a rapidly changing market. All of these must be documented qualitatively.They can also be applied as a test after making quantitative adjustments.Reports that are based on a great deal of qualitative analysis should include more explanation to justify the reasoning behind the appraiser's conclusions.Quantitative & Qualitative AnalysisAn appraisal is based on two main types of

analysis:Quantitative analysis is based on numbers, and

results in either dollar or percentage amounts.Qualitative analysis is used for elements that cannot be given a

numerical value.Quantitative analysis usually forms the basis of your opinion. You use math to determine adjustments to the comparable sales to indicate the value for the subject. You may also use percentage formulas to reflect market changes over time.But sometimes you will not have enough valid comparables to base everything on quantitative analysis. In these cases, you will rely more heavily on qualitative analysis, selecting a value for your subject based on the subject being superior or inferior to a particular comparable property.Quantitative adjustments and qualitative analysis can be used in combination to obtain a value opinion in the sales comparison approach. If both quantitative and qualitative adjustments are used in the same appraisal, the quantitative adjustments are usually performed first.Specific data is defined as"Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics."Specific data must be gathered about the