A: Originally posted on Dec 15th, 2010 after requests on this topic - I got inspiration for this post from Paul Zweben of Elliman who publishes HungryDomaine.com. When I do a comps analysis for a buyer client I do four main types of adjustments to come up with some idea of a fair market trading range for the target property: a floor adjustment, a size adjustment, a time adjustment, and a renovation adjustment. For now, lets discuss the floor adjustment and what I like to call the Floor Multiplier. Before I began I want to start out by saying that any type of floor adjustment is an imperfect science. There is no hard and fast rule and since the market doesn't exist in a vacuum, its impossible to predict how any one buyer will ultimately value the light/view/exposure differences between the TARGET APT and COMP-A, or COMP-B. With that said, we need to try right! Most new developments during the boom got in the habit of adding approximately $15,000 - $25,000 per floor in premiums for the luxuries of more sunlight and nicer views that come with higher floor units. For existing resale its a bit trickier so lets delve into this. There are two main elements in figuring out what kind of floor multiplier you should use when doing a comps analysis to what hopefully is a same-line sale (same footprint, different floor):
TYPE OF CHANGE IN VIEW and
AMOUNT OF GAP IN FLOORS.
TYPE OF CHANGE IN VIEW: When comparing two in-building same line comparable units we need to determine the level of change in the view quality. In other words, is there a drastic difference in the view or is there no difference in view? Lets take two hypothetical examples to explain this point: a)
Drastic Change in View Quality --> The difference between Unit 3A and Unit 25A, that share the same footprint and exposures. Unit 3A is on a low floor and does not clear the opposing buildings, limiting both the natural sunlight and the quality of the view. Unit 25A completely clears all nearby buildings and offers full city views and is flooded in sunlight. b)
No Change in View Quality --> The difference between Unit 22A and Unit 25A, that share the same footprint and exposures. While there is a 3 floor difference, both units offer the same quality of view and same level of natural sunlight. Make sense? Ok, lets move on to the next item to take into account.