I am looking to buy a house in rural San Francisco Bay Area and I am trying to carry out Competitive Market Analysis on my own.
Unfortunately, in the area where I have found one house that interests me, I am unable to find many other similar comparable properties that were recently sold. So I am trying to extrapolate what would be "fair price" to pay for the property by extrapolating data from other recently sold properties that have different land lot size and different building size.
Basically, I have created equation system where for each recently sold property I have added an equation to the system:
4,311*x+1.47*y=$2,050,000 ... house 1
4,000*x+45.21*y=$3,850,000 ... house 2
4,300*x+1.22*y=$1,950,000 ... house 3
And then I am attempting to get the approximate value for x which is implied value per one square foot of building. And y which is implied value per one acre of land. These properties look very similar to each other and I have thrown away those who have been recently remodeled or would need major rework.
However, I see two problems with my approach as
- it has two unknown variables. I believe I should start to solve the equation system by first substituting variable x which is value per square foot of building. So my first question - is there a database where I could get information on how much one square foot of building that was built in 1990 and last time remodeled in 2000 would cost? Or maybe I can use new construction cost and subtract prorated remodeling costs on when I expect to remodel house? Hard to get this used building price per square foot data data from authoritative source.
- the implied value for one acre of land obviously changes depending on how many acres I would be willing to buy. What function should I use to adjust appropriate price per acre of land depending on how many acres I would be willing to buy? It seems that each marginal acre becomes significantly cheaper based on recently sold properties.
FYI, the property I am looking at six months ago was listed for $3.6M. Then listing price went down to $2.8M. Seller offered me almost two digit discount on the latest $2.8M listing price, but even with this discount applied it still seems a little high. Hence I am trying to do CMA on my own.