A comparable property sold for $5,000,000. The appraiser determined that the sal

Question

A comparable property sold for $5,000,000. The appraiser determined that the sale price included favorable financing from the seller worth $250,000. The comparable property is at a location considered to be inferior to that of the subject property, and the appraiser believes it would be worth 5 percent more at the same location as the subject. The comparable property sold six months ago and prices have increased by 3 percent over the past six months. The comparable property has a net leasable area of 100,000 square feet and its NOI is $380,000. The subject property is 125,000 square feet and its NOI is $475,000. a. What is the indicated value of the subject property based on price per square foot? b. What is the indicated value of the subject property using an overall capitalization rate?

Explanation / Answer

Details Amt $ Selling Price of comparable property=            5,000,000 Less : Favorable financing from seller=             (250,000) Effective Selling Price Comparable property=            4,750,000 Subject property value +5% of the comparable property=            4,987,500 Price of subject property after 6 months including apprciation@3%=            5,137,125 a Current Price of the Subject Property = $ 5,137,125.00 Subject property Area in Sq feet               125,000 Price od Subject Property per Sq feet= $                41.10 b NOI of the subject property =               475,000 Current Price of subject property =            5,137,125 Capitalization Rate of subject property=475000/5137125= 9.25%

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