Sales Comparison Approach : Sales Difference Approach

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Sales Comparison Approach There are four steps in the sales comparison approach. These steps are: 1. Find recent sales that are comparable to the subject property. 2. Analyze the features of these sales and compare them with the features of the subject property. 3. Adjust the comparable sales for the differences between the sales and the subject property. 4. Arrive at the value conclusion. Elements of Comparison Comparison and adjustments of sales should be performed using the following four elements of comparison: 1. Terms and condition of sale 2. Time of sale 3. Location 4. Physical characteristics Quite often terms and condition of sale determine the price. Most real estate is purchases are loan based. The sale can be financed by banks, financial institution and non-institutional lenders. Some real estate transaction are also seller financed. In case of favorable seller financing, buyers might pay an inflated price, which distorts the fair market value of the property. Conditions of sale indicate the property rights being conveyed and whether an open-market transaction took place. It also has a crucial effect on the sales price. Therefore, the terms and conditions should be adjusted first. The real estate market is dynamic and price shifts are noticeable within very short amount of time. The real estate events occurred during the last decade clearly illustrate instability of the market. Due to this fact, the time adjustment in the sales comparison approach has priority
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