Opinion ID: 1771952
Heading Depth: 1
Heading Rank: 4

Heading: Market Data or Comparative Sales Approach

Text: Market data or comparative sales approach [6] is, as its alternative names imply, an approach to value in which the value estimate is predicated upon prices actually paid in open market transactions for various properties similar to the one at issue in the appraisal. The price paid for a similar apartment complex would then be evaluated with reference to the yearly gross income that such a property could expect to earn. The multiplier resulting from such an evaluation is used to account for variations existing between the properties recently sold regarding size (number of units), age and location. The appraiser for Hinds County analyzed the recent sales of similar subsidized housing, compared them against their respective gross incomes and arrived at a multiplier in the range of 5.5 to 7.0. The appraiser chose to employ a multiplier in the lower end of this range  6.0. The gross income, as reflected in the operating statement for Rebelwood, was then multiplied by 6.0 and yielded a value indication of $4,039,998.00. Taxpayer's appraisers also employed the market data approach, but began their analysis with a somewhat different assumption. The comparative sales analyzed by Taxpayer's appraisers included no subsidized housing. The appraisers also disregarded the rental subsidy income received by Rebelwood as well as the cash-flow advantages of Rebelwood's 7 1/2% mortgage. The rationale behind this exclusion was explained by Taxpayer's appraiser: The sale of a HUD ... for a practical matter, if any had sold they would have almost surely sold with the low interest rate mortgage going, with all the subsidies going and the real estate. Now if I were appraising a HUD for sale of all three together, yes, but I'm not. I'm appraising it for the real estate only. Had I had a sale of a HUD property, I can think of no practical ways to separate the three items so that I could back it into the real estate only. And since I am appraising for real estate only, I found sales that were of real estate only, not sales that included things other than the real estate. And that's why I didn't use any HUD sales. By using the recent sales of non-subsidized housing as a comparison and by excluding the advantages the complex possessed by virtue of its rent and mortgage subsidies, Taxpayer's appraisers testified that the market data approach suggests a value of $1,892,000.00.