To analyze sales using the summation method, the known parts are substituted in the summation formula to find the unknown part. For example:
ANALYZING A HOUSE SALE TO FIND THE VALUE OF THE BUILDING
$
| $ |
|
|
SALE
PRICE |
250 000 |
| LESS
LAND VALUE |
(80 000) |
| LESS
GROUND IMPROVEMENTS |
(5 000) |
| LESS
GARAGE |
(4 500) |
| LESS
INCLUSIONS |
(3 000) |
| ========= | |
|
BUILDING
CARCASS VALUE
|
157 500 |
Divide by the effective area: /200m2 = $787.50/m2
This method is also known as paired sales analysis.
ANALYZING A HOUSE SALE TO FIND LAND VALUE
|
|
$ |
| SALE
PRICE |
250 000 |
|
LESS BUILDING VALUE |
(160 500) |
| LESS
GROUND IMPROVEMENTS |
(5 000) |
| LESS
GARAGE |
(4 500) |
|
LESS
INCLUSIONS |
(3 000) |
| ========= | |
| LAND
VALUE: |
77 000 |
NB:
Residential land values are not divided by area because they are
valued by direct comparison lump sum.