1. The Student Handbook to T HE A PPRAISAL OF R EAL E STATE 1 Chapter 13 The Sales Comparison Approach

2. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 2 The Sales Comparison Approach The historical approach to value. The value of the subject property is derived by comparing it with prior sales of similar properties. This analytical tool can be difficult to prepare but is easily understood. Common sales comparison grids will be introduced and explored.

3. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 3 Table 13.1 Sales Comparison Grid

4. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 4 Relationship to Appraisal Principles Supply and demand Substitution Balance Externalities Market analysis and highest and best use

5. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Applicability and Limitations The sales comparison approach is nearly always applicable. Sales comparison is valid even when buyers are paying for income potential. Prior sales of the subject property are also evidence of value. Chapter 13 5

6. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 6 Procedure 1. Research the market for sales, listings, offerings, and pending sales. 2. Verify information per the scope of work. 3. Select relevant units of comparison. 4. Look for relevant differences in the comparable properties. 5. Reconcile the value conclusions into a single point opinion or range.

7. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 7 Procedure, continued Researching transactional data  MLS data  To prevent bad data from affecting the analysis, more data is better than less. Verifying transactional data Selecting units of comparison  Price per square foot of gross living area  Price per square foot of gross building area  Price per bedroom  Price per room

8. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 8 Table 13.2 Comparable Land Sales These sales do not seem comparable when the gross sale prices are compared. When a unit of comparison (price per acre) is applied, the data shows consistency.

9. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 9 Procedure, continued Analyzing and adjusting comparable sales  Identification and measurement of adjustments  Elements of comparison  Sequence of adjustments Suggested order of transactional adjustments  Real property rights conveyed  Financing terms  Conditions of sale  Expenditures made immediately after purchase  Market conditions (time)

10. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 10 Analysis Based on Price per Square Foot of Land Including Building

11. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 11 Procedure, continued Reconciling value indications in the sales comparison approach  The adjusted price is the indicated value of the subject.  The number of comparables required depends on the assignment conditions.  Questions to ask in reconciliation

12. Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 13 12 Problems Suggested solutions begin on page 421.