- 63 -
three complexes because only two must be discounted in order to sell
them within the reasonable time. However, if we were to discount two
complexes, but not the other one, the discounted complexes, which are
essentially similar to the remaining complex, but for the discount,
would sell and the complex that was not discounted would not. To
overcome this dilemma, we determine the discount on each complex that
will not sell within the reasonable of time and apportion one-third
of the aggregate discount to each complex so that a hypothetical
buyer will buy all three complexes within the reasonable time.
Because we are unsure which complexes will not sell within the
reasonable time, we determine the discount on the basis of the
complexes' average market value.
The complexes' average market value is $7,357,333 (($8,172,000
+ $9,190,000 + $4,710,000)/3), and the discount rates for the
complexes that will not sell for 30 and 42 months are 4.813 and
13.754 percent, respectively. Thus, we apply a 6.189-percent
discount to each apartment complex ((4.813% + 13.754%)/3). The
dollar discount for each of the complexes is as follows:
The Landings $505,765 ($8,172,000 x 6.189%)
Fox Hill $568,769 ($9,190,000 x 6.189%)
Stonehenge $291,502 ($4,710,000 x 6.189%)
6. Conclusion
A market absorption discount of 6.189 percent inheres in the
fair market value of each apartment complex. None of the other real
estate is valued by reference to a discount for market absorption.
Page: Previous 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 NextLast modified: May 25, 2011