The Sales Comparison, or Market Data, Approach to Value

In the sales comparison approach, an estimate of value obtained by comparing the subject property (the property under appraisal) with recent sales of comparable properties (properties similar to the subject). No two parcels of real estate are exactly alike, so each comparable property must be compared to the subject property and the sales prices adjusted for any dissimalar features. This approch is most often used by brokers and salespeople helping a seller to set a price for residential real estate. The principal factors for which adjustments must be made fall into four basic categories:

 

1. Sales or financing concessions. The consideration becomes important if a sale is not financed by a standard mortgage procedure.
2. Date of sale. An adjustments must be made if economic changes have occured since the comparable property was sold.
3. Location. An adjustment maybe necessary to compensate for location differnces. For example, similar properties might differ in price from neighborhood to neigborhood, or even within the same neighborhood.
4. Physical features and amenities. Physical features that may cause adjustments include age of building, size of lot, landscaping, construction, number of rooms, square feet of living space, interior and exterior condition, presence or absence of a garage, fire-place, central air conditioning and so forth.