Question

sally sold land she purchased three months earlier for use in her business.   her cost and adjusted basis in the land is $80,000. She incurred $5,000 in expenses related to the sale .

Answer 1

cost to value for land sales

the property sales has been valuated in differtent components .the valuation program emalates the steps that an appraiser would go through in manually appraising a property using the cost approach to value.

the formula for the cost approach is: (Replacement Cost New – Depreciation) + Land Value

The general formula below is then used to obtain the market value: Total Cost Factor X Cost & Design Index X Grade Index X Story Height Index X Size Index X Neighborhood Factor X Base Rate = Adjusted Base Rate

then

((Adjusted Base Rate X Effective Area) + Lump Sum Adjustment)) X Percent Good = Market Value of Improvements

then

(Market value of Improvements + Extra Features) + Market Land Value = Market Value of Property

some facters are affecting this calculation

1. Total Cost Factor: An indication of construction cost, which considers the foundation type, HVAC, exterior wall type.
2. Cost & Design Index: A modifying factor that reflects differences from what is typical, such as level of remodel, New home in old neighborhood, Economic mis-improvement. Examples of the codes include: partial (91), extensive (92), and total remodels (93).
3. Grade Index: Reflects overall quality of construction at the time the home was built. Grades range from E- at the low end to X+ at the high end. Story Height Index: Indicates story height from 1 to 4 stories.
4. Size Index: Addresses economies of scale in construction. Assuming all other factors equal, larger homes with a lower price per square foot rate than smaller homes. However, the overall market value of the larger home will still be higher than the smaller home.
5. Neighborhood Factor: The neighborhood economic factor, sometimes referred to as market adjustment factor, is often required to adjust values obtained from the cost approach to the market. These adjustments are applied by type of property and neighborhood based on sales ratio studies and other market analyses. These adjustment factors represent the demand side of the cost-derived estimates of value.
6. Base Rate: Base construction cost per square foot of one story, 1000 square foot, C grade, slab foundation home in the schedule.
7. Lump sum adjustments: Bathrooms, fireplaces, elevators.
8. Percent Good: This measures depreciation – the difference in value between the house as is and the house as if it were new. It is remaining useful life expressed as a percentage.
9. Extra features: These are additional or auxiliary structures, such as detached garages, pools, decks, carports.

these are the that factors. this will be help to calculate  property valuations in currect way