Full Grid Exercise: Three Sales, Start to Finish

This exercise carries one analysis from the market area to a price range: the sales considered and set aside, the rate behind every adjustment and the data it came from, each sale’s column worked line by line, the totals in dollars, and the reconciliation of three indications into a range. All figures are constructed for the exercise and reflect a typical Connecticut suburban subdivision.

The subject and its market area

The subject: 41 Ridge Road, a 1,780-square-foot cape, three bedrooms, one full and one half bath, one-car attached garage, quarter-acre interior lot, good condition with a kitchen updated in 2019 and original baths, in a subdivision of capes and small colonials built in the 1960s. Market area: the subdivision and the two adjoining streets of the same housing, which the sales history shows selling in the same range and at the same pace. The subject’s living area, 1,780 square feet, is taken from the assessor’s field card, the best available record here, with the source noted; the building department’s file shows permits consistent with the house as it stands.

The search of the market area returned nine capes of 1,550 to 2,050 square feet that closed in the past twelve months. Six were set aside, each with its reason recorded: two closed eleven and twelve months ago when more recent sales of similar houses were available; one, a 2,040-square-foot cape with a finished lower level and an in-law apartment, differed from the subject in too many material respects; one was a transfer that the deed and the listing agent confirmed was between family members; one was a bank-owned sale in poor condition, one of only two in the market area in the period and not typical of it; and one had been renovated throughout and would have needed adjustments for kitchen, baths, condition and size. Three remain, all in the market area, all capes of the subject’s era, and all within about seven percent of its size.

The adjustment rates and their sources

Market conditions. The segment, capes and small colonials of 1,500 to 2,100 square feet in the market area, produced only three to six sales a quarter, too few to read by quarter. The data set was widened by one step, to six-month periods:

The median rose $19,500, about five percent, between periods whose midpoints are twelve months apart, and the middle period confirms that the movement ran in one direction. Five percent a year is about 0.42 percent a month. The segment’s sale-to-list ratio rose from 98.6 to 100.2 percent over the same span, and median days on market fell from 34 to 21, both consistent with a rising market. A cape on Hillcrest Drive that resold eleven months after its previous sale, with no permits or listed improvements recorded between the sales, rose from $372,000 to $389,000, about 4.6 percent, or about 0.42 percent a month, which agrees with the trend data.

Living area. The Ratterman Method gives the starting point. The three comparables sold at about $240, $236 and $217 per square foot of living area, an average of about $231. The town’s assessor records show land carrying a substantial share of total value on these lots, which places the factor at the low end of the range: $231 × 0.25 is about $58. Two pairs in the subdivision differing mainly in size indicated $51 and $57, an average of $54. A rate of $55, between the pairs and the Ratterman figure, is used. The rate is set between the two figures here only because the pairs and the Ratterman figure lie within a few dollars of each other; where pairs differing mainly in size indicate a rate well away from the Ratterman figure, the pairs govern. Tested at $50 and at $60, no indication moves by more than $600, so the conclusion does not depend on the choice.

Second full bath. Two pairs of capes in the subdivision, alike in size and condition and contracted within two months of each other, one in each pair with two full baths and the other with one full and one half, differed by $17,000 and $19,500. The adjustment is about $18,000.

Garage. One clean pair, alike except for a two-car against a one-car garage, differed by $9,500. A second pair differed by $12,000, but its two-car house was also 60 square feet larger; at $55 that accounts for $3,300, leaving $8,700 for the garage. The adjustment is about $9,000.

Kitchen. Two pairs, each an updated kitchen against an original one in houses otherwise alike, differed by $14,000 and $16,500. The adjustment is about $15,000.

Concession. Two pairs in the subdivision, each a sale with a seller credit toward closing costs set beside an otherwise matching sale without one, contracted within two months of each other, show credits of $3,000 and $5,000 reflected in price about dollar for dollar: the sales with credits closed $3,200 and $4,800 higher than their matches. In this segment a credit of that size is adjusted at about its face amount.

Not adjusted. Every sale has three bedrooms, a quarter-acre interior lot and a 1960s build date, as the subject does, so none of those is adjusted.

Each interval’s percentage is rounded (2.08 to 2.1, 3.33 to 3.3) and each dollar figure to the nearest hundred.

Sale 1: 17 Ridge Road

A 1,720-square-foot cape, three bedrooms, one and a half baths, one-car garage, good condition with an updated kitchen, quarter-acre lot. It closed at $412,000 on a contract signed five months before the analysis; no concessions; between unrelated parties, listed and exposed in the ordinary way.

Time: five months at about 0.42 percent is about 2.1 percent, $8,700, to $420,700. The sale is 60 square feet smaller than the subject, so it is inferior on size and adjusted upward: 60 × $55 = $3,300. Baths, garage, kitchen, condition and site match, and nothing else is adjusted. Adjusted indication: $424,000.

Sale 2: 8 Hillcrest Drive

A 1,900-square-foot cape, three bedrooms, two full baths, two-car garage, good condition with an updated kitchen, quarter-acre lot. It closed at $449,000 on a contract signed three months before the analysis, with a $4,000 seller concession recorded in the closed listing; between unrelated parties, on the open market.

Concession: subtract $4,000, to $445,000, because the segment’s pairs show credits of this size affecting price about dollar for dollar. Time: three months is 1.25 percent of $445,000, $5,600, to $450,600; the rate is applied to the price net of the concession. The sale is 120 square feet larger, so it is superior on size: 120 × $55 = $6,600, subtracted. Its second full bath is superior to the subject’s half bath: subtract $18,000. Its two-car garage is superior to the subject’s one-car: subtract $9,000. Kitchen, condition and site match. Adjusted indication: $417,000.

Sale 3: 26 Ridge Road

A 1,800-square-foot cape, three bedrooms, one and a half baths, one-car garage, original kitchen and baths, quarter-acre lot. It sold at $391,000; no concessions; between unrelated parties, but the MLS shows 74 days on market (a relisting would reset that count) and one reduction. The contract date in its MLS record, the date both parties signed, is eight months before the analysis, and it closed about six and a half months before it; the time adjustment runs from the recorded contract date.

Time: eight months is about 3.3 percent, $12,900, to $403,900. It is 20 square feet larger, so it is superior on size and adjusted downward: 20 × $55 = $1,100. Its original kitchen is inferior to the subject’s updated one: add $15,000. Its original baths match the subject’s. Adjusted indication: $417,800.

The grid

Each column checks: $412,000 + $12,000 = $424,000; $449,000 − $32,000 = $417,000; $391,000 + $26,800 = $417,800. Sale 2’s net of −$32,000 understates its correction, because the $5,600 time adjustment ran against the four subtractions; its gross of $43,200 shows the full amount.

The indications. $424,000, $417,000 and $417,800. Sale 1, the most similar property with the fewest adjustments, sits at the top; Sale 2, which carried three property adjustments, and Sale 3, which carried a large time adjustment and a kitchen adjustment, sit together about $6,000 to $7,000 below it. The spread from lowest to highest is about $7,000, under two percent, the kind of convergence expected of a comparable set that competed for the same buyer. Sale 3’s 74 days on market and reduction are consistent with its original condition rather than with a problem in the sale.

What the grid shows. The sales bracket the subject on size (Sale 1 smaller, Sales 2 and 3 larger); the kitchen, bath and garage differences are one-sided and rest on measured pairs, not on a bracket. Every adjustment has a source in the subdivision. The market-conditions adjustment, which ranged from $5,600 to $12,900 across the three, was made to all three and was the largest single adjustment on Sale 1; had it been left out, Sale 3 would have indicated $404,900, about $13,000 below its full column, and would have set the bottom of the range by last year’s market rather than today’s.

What two other choices would have done

The grid’s agreement depends on rates drawn from the market, and two alternative choices show how much. Had the average of about $231 been applied to the size differences whole, without the Ratterman factor, Sale 1 would have received $13,860 for its 60 square feet and indicated $434,560; Sale 2 would have lost $27,720 for its 120 square feet and indicated $395,880; and Sale 3’s 20 square feet would have cost it $4,620 rather than $1,100, for an indication of $414,280. The spread would have widened from about $7,000 to about $38,700, and the three sales would have appeared to disagree about a house they in fact agree on.

Had Sale 2’s $4,000 concession been left in its price, the time adjustment would have been calculated on $449,000, and Sale 2 would have indicated $421,000, $4,000 higher than the evidence supports. On a single sale the difference is small; in a market where most sales carry a credit, it moves every comparable in the same direction.

Reconciling the indications into a range

The three indications are ordinarily weighed rather than averaged. Their average, about $420,000, would give Sale 2, with five adjustments and a gross of $43,200, the same say as Sale 1, with two adjustments and a gross of $12,000. Each sale is weighed by how directly it shows what the subject’s buyer would pay.

Sale 1 carries the most weight: it is on the subject’s street, the most similar overall, with the fewest adjustments, and needed the least correction. Sale 3 is next: also on the subject’s street and alike in size and baths, but its indication rests on a $15,000 kitchen adjustment and the longest time adjustment of the three. Sale 2 carries the least: it is the most recent, but three of its five adjustments are property differences, and its indication depends on the bath and garage figures as much as on the sale.

The sensitivity of the result is tested on the largest figures. If the kitchen adjustment were $10,000 or $20,000 rather than $15,000, Sale 3 would indicate $412,800 or $422,800. If the bath adjustment were $16,000 or $20,000, Sale 2 would indicate $419,000 or $415,000. Each change moves a single indication by $5,000 or less, the three indications remain within about $11,000 of one another, and none of the changes affects Sale 1.

Current listings are read as guidance. A 1,760-square-foot cape on Hillcrest Drive with an updated kitchen and updated baths, superior to the subject in its baths, is pending: it went under contract within nine days while listed at $434,900, and its contract price is not known until it closes. A 1,800-square-foot cape with an original kitchen is listed at $419,900; after 45 days without a contract at that price, buyers have generally not been willing to pay it. Neither is a sale, but both are consistent with the closed evidence: a superior house went under contract quickly while listed above the subject’s indications, and an inferior one listed near the middle of them has not gone under contract.

The analysis supports a price range of $417,000 to $425,000, with the weight of Sale 1 placing the subject in the upper part of it. The lower bound sits with Sales 2 and 3, the two sales carrying less weight, whose indications agree within $800 of each other; the upper bound sits just above Sale 1, the strongest evidence, rather than above the pending list price, which is not a sale. Where in that range the list price is set is a pricing decision made with the seller.

With the seller

The grid also answers the questions a seller is likely to ask. A seller who points to 8 Hillcrest Drive at $449,000 as the most recent sale can be shown its column: a $4,000 credit to the buyer, and a second full bath, a two-car garage and 120 more square feet that the subject does not have, together $37,600, less the $5,600 the market has risen since its contract was signed, which accounts for the $32,000 between its price and its $417,000 indication. A seller who points to the pending listing on Hillcrest Drive, listed at $434,900, can be shown that it has updated baths and that its contract price is not known until it closes. A seller who asks why 26 Ridge Road, at $391,000, is on the list at all can be shown that once its kitchen and its older contract date are accounted for, it agrees with the other two sales. Each answer is a line in the grid with its source, and none of them asks the seller to accept a figure on trust.

How it applies. The whole exercise, from the market area to the three indications, took the subdivision’s own sales and five sets of pairs, and every figure in it can be pointed to. That is the standard, and it is not more work than an unsupported grid; it is the same grid with the sources attached.