Evaluation of rate under this model is also similar to approach under Hedonic Model. However under this model working is less adhoc and more scientific. In this method also 4 to 6 comparable and genuine sales are first selected out of several sales collected by valuer in a locality. For comparison with subject property, 4 or more major attributes are decided by the valuer.
Thereafter for each attribute ranks are given.
- Rank (5) for Best Quality attribute.
- Rank (3) for Medium Quality attribute.
- Rank (1) for Poor Quality
If sale instance flat has best specification Rank (5) is given where as flat having medium quality or poor specification are given Rank(3) or (1) respectively.
Let us see how ranks are given for different attributes of the properties.
Location Factor:
- Rank (5) if civic amenities are
- Rank (3) if amenities are at moderate
- Rank (1) if amenities are far off say at 1 KM distance
Size Factor :
- Rank (5) if flat area is 75 sq.mts. or
- Rank (3) if flat area is 75 sq.mts. to 150 mts.
- Rank (1) if flat area is 150 mts. or more.
Age Factor:
- Rank (5) Building less than 10 years
- Rank (3) Building having age 10 – 30 years period.
- Rank (1) Building having age 30 years or
Specification Factor:
- Rank (5) Delux specification.
- Rank (3) Standard specification
- Rank (1) Poor specification
There could be many more factors or attribute of property which can be considered by the valuer for comparison and adjustment.
Having selected sales, major attributes and having given ranks, now all sales are placed in adjustment grid in tabular form.
Now ranks of each attribute of sale instance premises is compared with rank of said attribute of the subject property. Appropriate weight age is given for higher or lower rank. Each attribute is compared in isolation of all other attributes. If we compare size factor of these sales with subject property, for that particular moment we ignore effect due to variations in specification or its location angle. Positive and negative weight ages are given looking to inferior (Rank-1) or superior rank (Rank-5) of sale instance property.
In short, we can say that this system of ranking and comparison is a notional process of bringing sale instance flat to the level of quality or attribute of subject property. If attribute of sale instance property is superior to quality of attribute of subject property, a negative weight age is considered for adjustment to sale instance rate so that sale instance property quality is brought down to level of quality of subject property. In case of inferior quality sale instance, positive weight age is considered to bring up said quality to level of subject property. It is like making Rich man poor by tax (- ve) and making poor man rich by grant or subsidy (+ ve) so that all are equal.
These individual weight ages are ultimately totalled up to find out overall effect on basic sale instance rate.
Finally derived adjusted rate in case of each sale instance is then computed and than final comparison is done.
Example : A residential flat to be valued. The building is 10 years old building. The building is in middle class locality on road parallel to main road. Building good specification and good aesthetics. Area of flat is 1200 sft. Marble flooring is provided. Valuation is required as on 31.03.2018. The following 3 sale instances are available for comparison.
Sale ‘A’:1800 sft flat sold on 31-8-2018 at Rs.4500 per sft rate. Building is 20 years old and abuts on main road. Good specification and marble floor are provided. Building is also provided with garden, club house and swimming pool.
Sale ‘B’:1100 sft flat sold on 31-1-2018 at Rs.3200/sft rate. It is in by lane but it is closer to market and school as compared to subject flat. Building is 18years old and specification is average with mosaic tiles flooring.
Sale ‘C’:750 sft flat sold on 31-10-2017 at Rs.2250/sft rate. It is at 1kilometer distance from the market and station. It is in poor class locality. Buildingis 30 years old with poor specification.
Solution:
Grid Table as per Adjustment Grid Model.
(Balance Sheet of weighted values as shown on next page)
Grid Table
| Sr.
no. |
Attributes | Sub.
Flat |
Comparable
‘A’ |
Comparable
‘B’ |
Comparable
‘C’ |
Remarks |
| 1 | Area in sft | 1200 | 1800 | 1100 | 750 | |
| 2 | Sale Rate | 4500 per sft | 3200 per sft | 2250 per sft | ||
| 3 | Time factor | -5 months | +2 months | +5 months | ||
| 4 | Adjustment for Time | -5%
-225 |
+2%
+64 |
+5%
+113 |
Weightage
1% per Month |
|
| 5 | Adjusted
Rate Rs/sft |
4275 per sft | 3264 per sft | 2363 per sft | ||
| 6 | Location Factor Ranks …..3
Weightage |
Rank 5 -15% |
Rank 3 – 5% |
Rank 1 + 25% |
||
| 7 | Size Factor
Ranks 3 Weightage |
Rank 1 +5% |
Rank 3 +0% |
Rank 5 -5% |
||
| 8 | Age Factor Rank 5 Weightage1
% every 2 years |
Rank 1 +5% |
Rank 1 +4% |
Rank 1 +10% |
20-10=10 18-10=8 30-20=10 |
|
| 9. | Specification Factor Ranks 3 Weightage |
Rank 5 -10% |
Rank 3 +15% |
Rank 1 +25% |
|||
| 10 | Cumulative
weightage |
-15% | +14% | +55% | |||
| 11 | Rate
Adjustment |
-Rs641 | +Rs456 | +Rs1300 | |||
| 12 | Adjusted
Rate per Sft |
3650 | 3634 | 3720 | 3663 | ||
Rate to be adopted for subject flat = Rs 3650 per sft
Value for Subject Flat (31.03.2018) = 1200 x 3650 = Rs 43,80,000/-
It will be seen from above solution of the example that the sequence of adjustment (Basic rule) starts with applying weightage for the time factor first on the basic rates of the sales. Weight ages for the other attributes are considered thereafter on the overall basis and applied to already time adjusted rates and not on basic rate of the sale instances.
It will also be seen that before adjustment of rates, difference in rate between highest and lowest rate in locality was Rs.2250/sft (100% difference). However after making notional adjustments by giving weight ages for different attributes, difference between highest and lowest rates is reduced to only Rs. 29/sft, (Hardly 1%) difference. This reduced difference makes Valuer’s job very easy in selecting appropriate rate for subject property.
This adjustment grid model can be adopted for comparison of not only ownership flats but also for open plots, shops and industrial units.
