The subject property is a small commercial building in a small town. It contains 3,500 square feet
Question:
The subject property is a small commercial building in a small town. It contains 3,500 square feet of gross building area and was constructed 10 years ago. It does not have a finished basement. The lender has agreed to provide a financing package that provides $5,000 in financial benefits. Examination of the market has revealed several sales of competitive properties. Sales price data indicate that the market is steady, increasing at about 5% per year. A market analysis has indicated that a basement adds approximately $15,000 to the value of commercial buildings ranging in size from 2,500 to 5,000 square feet.
• Comparable 1 has 2,800 square feet of building area. It has a finished basement. It was sold approximately one year ago for $275,000, at financing terms that are typical of the market.
• Comparable 2 has 3,000 square feet of building area. It does not have a finished basement. It sold one year ago for $280,000 for a financing package similar to that of the subject.
• Comparable 3 has 3,000 square feet of building area. It has a finished basement. It sold three days ago for $300,000 at terms that are typical in the market.
Which sales should be adjusted for market conditions?
(1) Comparables 1 and 2
(2) Comparables 2 and 3
(3) Comparables 1 and 3
(4) None of the comparables
Core Concepts of Government and Not For Profit Accounting
ISBN: 978-0471737926
2nd edition
Authors: Michael H. Granof, Penelope S. Wardlow