How do you adjust a comp to account for age difference?

Question

How would one go about adjusting a comp for age? Looking at a property located in Knoxville, TN that is about 30 years older than similar houses in size, bedroom, and baths.

I have adjusted data to pull older comps and expanded the radius to include more data. Any suggestions?

Is there a rule of thumb to adjust for age?

Dustin Allen · Answer

@Randell Harris

That sounds overly complex. I guess the real question is what is the purpose of your cost analysis? If you’re looking to find a purchase or sale price, that’s way too complex. The goal is to figure out what the average buyer would be willing to pay. They aren’t going to even come close to following what you just proposed.  Most buyers will look at a house and take into account the finishes, the appliances and then look at the age of the house. Buyers are willing to pay more for a home built in 1990 than they are for a home built in 1960. There are just too many issues that “could” arise with the older home.

Randell Harris · Answer

@Dustin Allen

Makes sense to do that.  I did go back to 6 months.  From what I can tell everything else looks all pretty equal except for the age.  HVAC replaced within the last 5 years, electrical upgraded to 200 amp service, updated middle of the road fixtures and flooring.  Do you think using a cost approach formula would work in this scenario by adjusting the comps via increasing the total value of the straight line depreciation by the delta of the age?

Dustin Allen · Answer

@Randell Harris

30 years age difference is not a comp unless the older home has had everything brought up to the same standards (plumbing, electrical, roof, mechanicals).  You are better off comparing to similar age properties that sold longer ago than you would normally look back. Usually it’s 3 months of sold homes, try looking 6 months or more and see if you find better comps.