The sales comparison approach

What we will learn Introducing the Sales Comparison Approach Collecting Comparable Sales Data Data Resources on the Internet Appraisal Statistical Concepts

Introducing the Sales Comparison Approach The sales comparison approach ( direct comparison, Sales, or market) is based on the Principle of Substitution. It is a process that collects sales of comparable properties that occurred about the same time as the date of value, and compares them to the property being appraised.

Four Steps Research recent sales Analyze the sales Adjust for the differences Arrive at value estimate

Key Concepts of the Sales Comparison Approach The importance of substitution The simplicity of market comparisons The relationship to statistics The relevance of adjustments The significance of market data

Collecting Comparable Sales Data Selecting the Comparable Sales Finding useful information Sources of Market Data Computer Data Search

Selecting the Comparable Sales Three criteria of a valid comparable sale: The Competitive Property. An open market transaction Date of Sale Defining the sales search area Consider the sales history of the subject property

Finding useful information The Sales Transaction Data Physical Characteristics of the Sale Legal Data about the Comparable sale Location of the sale Market Conditions Using Listings and Offers How many sales? Verification of Data

Sources of Market Data Public Records Multiple Listing Services Data Services The Insurance Companies The Internet Parties to the Transaction Appraisal Office Data Files

Computer Data Search Access Procedure

Data Resources on the Internet Websites of Government Agencies: General Data on the Economy – Bureau of Labor Statistics: http://stats.bls.gov/ OFHEO, House Price Index: http://ofheo.gov/HPL.asp Regulatory Information – Department of Housing and Urban Development: http://www.hud.gov/

2. Websites of Industry Service Organisations Comparable Sales: DataQuick Property Finder: http://www.dataquick.com Cost and Construction: R.S. Means Company-Cost Data: http://www.rsmeans.com/ General and Other Sites: Realty Rates: http://www.realtyrates.com 3. Websites of Trade assotiations American Sociaty of Appraisers: http://www.appraisers.org/

Appraisal Statistical Concepts Calculating the central tendency includes: Mean, Median, Mode, Range, Standard deviation) Linear and multiple regressions represent two additional statistical methods used in valuations, primarily in mass appraisal work and in loan reviews.