The ER math is a simple calculation that replaces the ASFMRA’s traditional “land-mix” procedure that traditionally contained multiple computations. The process converts the “land contribution” within each sale to a mathematical percentage, an expression of the “whole”. To begin, subject ratios are required to express its mathematic composition (74.48% below). Then, one (1) unimproved and one (1) improved sale were reduced to the same mathematical “expression” or Equivalency Ratio to ultimately compute the “land-mix” adjustment for each.
When this process is repeated for each sale, the percent change between the sales and subject provide the basis for a simple calculation for the differences in “land-mix” or composition disparities. Two sales are shown below, i.e., one unimproved and one improved; plus, three (3) ways to compute the Sale ER’s.
Note for Alternative 2 below: The $3,000,00 “Land Contribution” is divided by the “Gross Units x Top $/unit” or 1,170 gross units x $3,634.16/acre for Land Type 1 = $4,251,969 which becomes the denominator for the calculation shown inside the smaller box ($3,000,000 ÷ $4,251,969 = 70.56%).
The Land-Mix Summary: | ER Factors | ER Factors | |
Sale A | 70.46% | Sale B | 67.54% |
Subject | 74.48% | Subject | 74.48% |
% Change (NOT % Difference) | 5.71% | 10.28% | |
or = (Difference ÷ Sale Base) | ↓ | ↓ | |
SCA Grid Blended $/Acre | $2,564.10 | $2,796.61 | |
% Adjustment | 5.71% | 10.28% | |
$/Acre Adjustment | + $ 146.41 | + $ 287.49 | |
Land-Mix Adjusted $/Acre | $2,710.51 | $3,084.10 |
If the Subject is improved, an additional adjustment may be required — to both sales. Even though Sale B is improved, the structures may be different sizes, condition, and remaining effective ages and require additional consideration(s), or “+, -, or =” calculations for its final impact on the final price per acre.