Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

1. Suppose you have a subject property with a 105,000 sq. ft. lot and existing i

ID: 3142624 • Letter: 1

Question

1. Suppose you have a subject property with a 105,000 sq. ft. lot and existing improvements for which you estimate the reproduction cost new to be $2,500,000, physical deterioration to be $400,000, functional obsolescence to be $50,000, and external obsolescence to be $50,000.
If you have information on a comparable lot of 110,000 sq. ft. which recently sold for $250,000 and the only adjustment is $1.75 per sq. ft. for the difference in lot size, what is the indicated total value for the subject property?
2.You are attempting to arrive at what the monthly rate of change that has recently occurred in the real estate market. In doing some market research, you find two properties that have sold twice within the last two years. Property A sold 22 months ago for $98,500; it sold last week for $108,000. Property B sold 20 months ago for $105,000; it sold two weeks ago for $113,500?

Explanation / Answer

1)

Lot value of 110,000 sq ft = $250,000

So Lot value of 110,000 sq ft = $250,000 - 5000 * $1.75 = + $241,250

Construction Cost = + $2, 500, 000

Physical deterioration = - $400,000

functional obsolescence = - $50,000

External obsolescence = - $50,000

total value of the property = $2,241,250

2)

P [t=-22]= $98,500

P [t=0] = $108,000

108,000 = 98,500 (1+r)^22

r1= 0.419%

P [t=-20]= $105,000

P [t=0] = $113,500

113,500 = 105,000 (1+r)^20

r2 = 0.39%

To get Combined property rate change

We will calculate the price of property 1 20 months ago

P [t=-20] =P[t=-22] (1+.419%)^2

P [t=-20] = $99,411.12

Combined property rate change

$108,000 + $113,500 = ($99,411.12 + $105,,000) * (1+r)^20

r = 0.402% is the answer.