Definition of "Adjusted sales price"
The adjusted sales price is also known as price adjustment or adjustment in appraisals. A definition for the adjusted sales price is the appraisal determined through the market approach or the foundation of comparative market analysis (CMA). An adjusted sales price comes from analyzing the recently sold comparables and adding or subtracting differences to reach an estimated property value.
When a sale price of a comparable is adjusted to the appraised property by taking into account factors that can differentiate the two properties, appraisals reach the adjusted sales price. They adjust the price of the comparable property to the property being appraised.
What is an Adjusted Sale Price in Real Estate Appraisals?
To reach the adjusted sale price of a property, the appraiser looks at recent sales in the area of comparable properties to estimate the property’s value. This method requires an active market of similar sold properties for a more accurate valuation. The adjusted sale price is determined by several factors that differentiate the comparable property and the appraised property. At the end of the appraisal, the adjusted sale price is different from the comparables. It reflects the properties’ condition, the time of the construction, the wear and tear of the properties, and any other differences betweenthem.
Important to note here is that not only one comparable is used during the market approach method. It is best to use several to take all the factors into account and reach a more accurate estimated value.
Factors that Influence the Adjusted Sales Price
We look at comparables in real estate during an appraisal. It would be ideal for the comparables’ sale to have been as close to the present time as possible and be as similar to the appraised property as possible. If we manage to find those types of comparables, then the adjustment process is irrelevant.
However, we don’t live in an ideal world, and several factors will influence the adjusted sales price:
- Estate interest - when we consider the type of estate the owner has, the price of a comparable estate might be inaccurate to the evaluated property’s worth. It might be better to discount properties if the fee simple estate differences are too significant, but it’s not always possible to from lack of other comparables. A fee simple absolute might have a bigger value than a fee simple defeasible;
- Buying a property in Cash - when a buyer doesn't apply for a loan and offers a full cash offer the seller may take some money off the listing price.
- Market conditions - the economy can lead to an increase or decrease in prices unless the comparables sold in theweek before the appraisal;
- Conditions of sale - the sale of the comparables could be forced sales;
- Location - differences that can affect public transport, traffic, quality of schools, available shops or other utilities;
- Aspect - the most obvious differences are the physical ones: condition, age, design, quality, or features (a balcony, a patio, a terrace, etc.)
- Use - during real estate appraisals, the property is evaluated at its highest and best use. If the comparables or the appraised property are not at their highest and best use, adjustments are made to the price.
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