2020 ER Sales Comparison Approach
There are two SCA options, one in the "Classic" Forms and one in the "UAAR (New)" Forms Library this is shown here. The page can be used up to four (4) times by merely adding the page multiple times into the report; thus,sixteen (16) sales that can be displayed within a single report. Special Note: DataLog and SCA Grid uses the geo-referencing feature (lat/long) to calculate the distance from each sale to the subject (discussed later in the "lower SCA grid" information.
The ER computation can preferably begin on the 2020 Subject QuickStart Page, or can be entered into the 2020 Subject Land Description. The 2020 Case Study includes a subject with 640 acres, but only 240 acres are Cropland 1. The remaining acreage is comprised of Cropland 2, Hay/Meadow, Pasture A, Pasture B. The ER calculation is:
Since Cropland 1 was selected as the data standard at 100%, the 240 acres within the subject is logically equal to 240 Equivalent Units. Cropland 2, however, has a ratio of 80%. Thus, the 200 acres of Cropland 2 is multiplied by 80% which produces 160 acres of Equivalent Units (red box). The remaining inferior acreages (compared to Cropland 1) are converted through the respective ratios to calculate their Equivalent Units --- ultimately totaling 449.50 shown in green. This simply means mathematically 499.50 x 100% produces the same value as 640 acres in the mixture shown with Cropland 2 through Pasture B (four land types) are less valuable. In the "tutorial" section in the Table of Contents, the "ER Theory" walks the user through three different ways the ER can be calculated for sales; however, the subject only has one --- and it is shown above using the market derived ratios.
The final calculation divides the 449.50 equivalent units (green) by the effective unit size of 640 acres (purple), showing the subject's mathematical equivalency rating (ER) is 78.05% (yellow). This procedure standardizes the subject and sales data to accomplish the land-mix adjustment in a single calculation in the second section of this page (shown below).
There are four sections in each SCA page:
1. The top portion of the page contains factual information about the subject (green) and sales. There are three variable fields (red) where the user can define the more important elements within the data set and valuation.
The yellow box shows the ER Factor for the subject and sales. In this example, Cropland 1 is the top land row or 100% land. The subject and sales are expressed as a percentage "as if" each were 100% Cropland 1.
2. The second grid on the ER SCA page involved the land and building mix portions. Simply, the sales are adjusted for the difference in land and building mix compared to the subject. The "ER Land Mix Adjustment Worksheet" is provided for the appraiser, or it can be included in the documentation if desired. It is noted, the worksheet is not necessary because AgWare calculates the adjustment automatically. AgWare computes the "percent (%) change" between the sale and subject, then multiplies the land price per acre (overall land contribution) by that percent change for the land mix adjustment. NOTE: this is NOT the percent difference, but rather the percentage change between each sale and subject. In the example above, Sale 6 at 78% is nearly identical to the Subject at 78.05%, thus, a very small adjustment for land difference. Sale 7 (green box) is a superior example. The percent change from 69% (Sale 7) compared to the subject at 78.05%, is 13.11% (Sale's 69% minus Subject's 78.05% = 9.05% DIFFERENCE divided by the Sale at 69% = 13.11% as the percent change between the two properties, or an upward adjustment to equate to the subject. The math is $3,738/acre land contribution for Sale 7 x 13.11% = $490/acre adjustment shown in the green box below for the land difference.
The companion adjustment for buildings is computed on a separate page. There are two options:
- head-to-head and sale-by-sale comparison for ten (10) improvements that has transitionally been used in ASFMRA for several decades where each sale provides a separate appraisal of the subject's buildings based on what the sale indicated they were worth, or
- valuing twenty buildings associated with a single sale compared to a subject that would likely have more than ten improvements.
Both are shown briefly below, but "Help" is also available on each page. The improvements for four (4) sales are shown on a single page (Improvement Adjustments (Head-to-Head)) with only the first sale (Sale 6) shown below. Note: there is room for only ten buildings on this format.
The single improvement on one page allows for twenty (20 buildings, rather than ten shown above. The same $102/acre adjustment is calculated by a single building. The "one-building" head-to-head was provided for more complex structural components with up to twenty different buildings on the sale/subject. In this example, the short or long version provides the same answer at $102/acre.
The Market Conditions or Time Adjustment section shows the "split time" procedure. Some markets in the U.S. have either the land or improvements static or changing at different rates. Thus, the land and building contributions are split based upon your DataLog analysis to allow separate rates of change for either.
The red box entries must be entered (the appraisal date can populated this page if the Subject QuickStart page is used). The user then selects "monthly" or "annual" for the periods and either "straight-line" or "compound" for the rate method. Then enter the monthly rate of change (0.5%/month for this example) and the corresponding adjustment land land is applied. The improvements work in the same manner. The resulting adjusted and/or unadjusted numbers are "re-joined" as the "Combined Adjusted Price" before moving on into the grid.
The lower part of the grid is traditional, at least for the adjustment process. However, there are six choices for each "feature". There are three (3) entered manually and three (3) calculated or computed. The example below is for the 100% ER Factor procedure (shown in yellow) is calculated where the 100% adjustment measured from the "single-feature" pairing page is entered on line two, and the actual adjustment is then calibrated to the subject' ER Factor with the subject's 78% ER Factor ($1,500 x 78% = $1,170 adjustment). The gross adjustment for Sale 6 is entered as a negative because the sale, with live water, is superior to the subject without.
All six (6) options are shown on the summary chart below:
Geo-Referencing: Since the lat/long is entered for your subject, and if the same completed for the sales in DataLog, enter "Distance To" in one of the five adjustment sections --- say instead of "live water", you type "Distance to Subject" and the program will report that distance in miles on the top line. For Sale 6 this example shows 650 miles. Obviously, the geo-referencing was altered to protect the actual locations. AgWare expects your sales will reflect something closer to your subject.