Question

You are appraising a ranch home of 1,500 square feet with six rooms, one and one-half bathrooms, a built-in oven and range, a full basement, and a one-car carport. The construction is typical for the area. your analysis by the cost approach, you have developed the following information on newly constructed houses in the neighborhood . 1. Builder Jones sells a 1.200 -square -foot ranch house with the same features for $78,000 . You both believe the lot is worth $13,000 . 2. Builder Smith sells a 1,700 -square -foot ranch house with the same features for $96,000 . The lot is worth $14,000 . 3. Builder Johnson sells a 1,500 -square - foot ranch house with all the same features except a carport for $88,000 . He thinks the lot is worth $19,900 , but from similar lot sales , you estimate the lot to be worth $16,000 . The cost of constructing a carport is $3,600 .

Answer 1

The student's question involves the appraisal of a ranch home using comparable newly constructed houses in the area to calculate the property value through the cost approach. Housing prices have historically shown a steady increase, both on a national scale and with local variations.

Step-by-step explanation:

The question relates to a real estate appraisal using the cost approach method. This entails analyzing similar properties recently constructed in the neighborhood to determine both the value of the land and the cost of construction for the subject property. Data is given from three different builders, each selling houses of varying sizes and features. It is necessary to adjust for differences such as square footage and the presence or absence of a carport.

Housing prices trends show a steady increase over time. For instance, the median sales price for a new one-family home in 1990 was $122,900, which grew to $294,000 by 2015, as per U.S. Census data. This reflects a national average financial return of 3.1% per year in the housing market, although local market conditions can vary significantly.