An owner has decided to sell a home. The home currently has a one-car garage. All the recent sales comps in the neighborhood have two-car garages. After checking with contractors, the owner finds that expanding the garage to accommodate a second car would cost $12,000. When performing a comparative market analysis for this property, a broker would make what kind of an adjustment
Subtract from the value of owner's home.
In a comparative market analysis, adjustments are made to reflect differences between properties. Since the owner's home has a one-car garage while the recent sales comps have two-car garages, the broker would subtract the estimated cost of expanding the garage from the value of the owner's home to align it with the market standards.
Adding to the value of the owner's home would imply that the one-car garage is more desirable than a two-car garage, which contradicts the reality of the neighborhood's market. Since the comps with two-car garages are selling for higher prices, it would not be appropriate to add value for the current garage size.
Correctly, this option reflects the need to adjust the owner's home value downward to account for the difference in garage size. The $12,000 cost to expand the garage should be considered in the analysis, as the lack of a two-car garage diminishes the home's competitive position in the market.
Adding to the sales price of recent sales comps would inaccurately inflate their values, as it overlooks the established market conditions. The comps reflect the market's valuation of properties with two-car garages, and no additional costs should be factored into their prices.
Subtracting from the sales price of recent sales comps would suggest that the two-car garages are less valuable than they are perceived in the market, which is misleading. The comps serve as benchmarks for value, and their prices should remain intact to accurately represent market conditions.
When conducting a comparative market analysis, it is essential to adjust the value of the property in question to reflect its features compared to similar properties. In this case, the owner’s home requires a subtraction of $12,000 from its value due to its one-car garage, aligning it more closely with the market where two-car garages are standard. This adjustment ensures that the property is evaluated fairly against the competition in the neighborhood.
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