Sales Comparison Approach

1
Sales Comparison Approach

• Dr. Jim Burton
• Marketing Real Estate
• Richards College of Business

2
Overview

• Differences affecting value
• Principles
• Applicability
• Procedure
• Sources of sales data
• Units of comparison
• Elements of comparison

3
Differences affecting value

• Property rights appraised
• Buyer/seller motivations
• Financing terms
• Market conditions at sale
• Size physical features
• Location
• Economic characteristics

4
Principles

• Supply demand
• Substitution
• Balance
• Externalities
• Highest best use

5
Applicability

• Value vacant land
• Value improved properties
• Sufficient comparable sales data
• Single-family homes
• Used as a check for income properties

6
Procedure

• Get sales data
• Verify sales
• Select units of comparison
• Adjust sales to subject
• Reconcile value range

7
Sources of sales data

• Courthouse records
• State sales tax records
• Sales reporting services
• Real estate periodicals
• Interviews with the parties
• Other appraisers, brokers, lenders

8
Units of comparison

• Price/ SF
• Price/room
• Price/unit
• Price/bed
• Price/acre
• Price/cubic foot
• Price/seat

9
Elements of comparison

• Property rights conveyed
• Financing terms
• Conditions of sale
• Buyer expenditures
• Time of sale
• Location

10
Elements of comparison

• Physical characteristics
• Economic characteristics
• Zoning potential use
• Non-realty components

11
Quantitative Analysis

• Paired data
• Grouped data
• Secondary data
• Statistical trend analysis
• Graphic analysis
• Costs analysis
• Capitalization of income differences

12
Qualitative Analysis

• Relative comparisons
• Ranking
• Personal interviews
• Physical inspections