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  4. 3 Ways to Compute the ER

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.

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