2005-01-26 CC Packet - Laserfiche WebLink

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2. Financing - A financing adjustment is actually a specific motivation adjustment and often is not capable of being accurately derived from a mathematical discounting process. The most reliable financing adjustment is from paired sales but such detailed data is generally not available from sales information. In practice, the parties in a transaction should be cousulted concerning the effects of favorable (or unfavorable) financing and this should be compared to a mathematically derived indication by discounting the payments specified by the transaction at the market rate of interest. The most commouly used market value definition requires appraising to "cash, with typical institutional financing or other stated terms." Furthermore, if the subject is assmned to have other than typical institutional terms, the terms and the effects of the financing on the appraised value should be set forth in the report. Generally, it is good practice to indicate the cash value of the subject and bottom line the effects of the financing assmned in the appraisal. None of the comparables required adjustment for financing since they are all cash or at market financing terms. 3. Conditions of sale (motivation) - The first three adjustments, including conditions of sale . are applied before the market conditious adjustment. This is because the motivation of the parties in the transaction to agree on the price paid was at the time of sale. As with property rights conveyed, a motivation other than that assumed in the value definition may require discarding a sale from consideration. For example, if a sale were affected by undue duress, then no appropriate adjustment could probably be derived. However, an adjustment for plottage, purchasing additional land for expansion or parking, and other typically motivated sales may have an adjustment that may be inferred from the market by comparison or from information provided by the buyer or seller. None of the listed sales are considered to be reflective of this condition. 4. Market conditions (time) - A time adjustment is a market conditions adjustment because it is changes in the marketplace, and not the passage of time, that causes prices to change (the principle of change). A time adjustment is a cmnulative adjustment within the sales comparison approach that requires a mathematical computation. Time adjustments may be straight-line (noncompounded) or compound (curvilinear). Neither method is more appropriate than the other as long as market changes are accurately adjusted, and as long as the procedure used is consistent with the method used when a time adjustment was abstracted and with the manner in which it was applied. We have observed a consistent pattern of change in the market for lake lots over the past 10 year period. Comparable Sale #9 represents a resale of Comparable Sale #8 after 2 years or 24 months. These sales reflect an inflation rate of about 10 % annually. We have therefore applied a time adjustment to each sale based on 10% annually. I I 5. Location - A location adjustment is an additive adjustment, while the previous four adjustments are cmnulative. Tracts of similar highest and best use should be compared. Generally, it is inappropriate to use sales of different highest and best use with an attempt to adjust the differences for location. For example, it would be better to obtain sales of the same highest and best use from a larger area and adjust for differences in location, than to obtaiU sales of properties that are closer to the subject but have a different highest and best use. Because this adjustment is considered to be additive, it is netted out with physical and other adjustments. All the comparable sales were considered to have either park, conservation, assemblage for density or residential purposes as their highest and best use. No adjustments were, however made for location. 28