How Do You Do A Sales Comparison Approach?

What must be analyzed in the sales comparison approach in a real property appraisal?

The sales comparison approach considers the selling prices of similar, recently sold properties.

Those sales prices are adjusted to reflect the time, conditions, and differences between the comparable properties and the subject property.

The result of the adjustments is a subject value estimate..

What two types of data does an appraiser gather?

There are generally two types of data that an appraiser will collect before making their evaluation: specific data and general data. Specific data refers to information gathered on the home itself. The home’s location, amenities, upgrades, size and other factors are all considered specific data.

What criteria do appraisers use?

A qualified appraiser creates a report based on a visual inspection, using recent sales of similar properties, current market trends, and aspects of the home (e.g., amenities, floor plan, square footage) to determine the property’s appraisal value.

How do you calculate sales comparison method?

Average price per square foot: Once similar homes are compiled, take each of their sale prices and divide them by their square footage. The result yields the cost per square foot based on the homes in the sales comparison analysis.

What are the steps in the sales comparison approach to estimating value?

The Steps in the Sales Comparison Approach are:Find recent sales of similar houses in the subject’s market area.Verify data regarding comparables.Compare each sale with the subject to determine the differences.Make adjustments to determine the dollar differences.Derive an indicated value after making adjustments.

How do you calculate cost approach?

Steps in the Cost Approach MethodEstimate the reproduction or replacement cost of the structure. … Estimate the depreciation of the improvements. … Estimate the market value of land. … Deduct accrued depreciation from the reproduction/replacement cost. … Add the depreciated cost of the structure to the estimated value of the land.

How far back can appraisers go for comps?

When an appraiser is looking for comparable properties to determine a price, they are supposed to only look at sales within the last 90 days. Now, if there aren’t enough sales a lender might go back six to 12 months. But the ideal is 90 days.

Is data from recent sales enough to establish value?

Is data from recent sales enough to establish value? No, combining recent sales only gives you an estimate.

What is the number one rule of adjusting comparables?

1. Multiply the value of the comparable by the percentage amount to get the amount of the adjustment. 2. Then add or subtract this amount from the comparable’s value, depending on the relationship between the two properties.

What are the 3 appraisal approaches?

There are three types of approaches to value and they are sales comparison approach, cost approach and income capitalization approach. The sales comparison approach is the most commonly used approach in real estate appraisal practice for determining the value.

When would you use the cost approach?

The cost approach is another method an appraiser may use to develop an opinion of value. In a nutshell, it’s a breakdown of what it would cost to rebuild the property today if it were destroyed.

What is the market data approach?

The market data approach or sales comparison approach is finding value by comparing a property to other properties of similar size and condition in the same area. … The market data approach is widely accepted as the most accurate method of comparison for residential real estate.

How do you compare property values?

Pro tips to compare house prices from top real estate agentsCompare “apples to apples” across the board: location, beds, baths, and more. … Account for square footage inside and outside the home. … Take note of the surrounding areas of the house. … Filter your search to only include recently sold homes (not active listings).More items…•

What is the basic principle in the sales comparison approach?

The sales comparison approach is based upon the principles of supply and demand, as well as upon the principle of substitution. Supply and demand indicates value through typical market behavior of both buyers and sellers.

What is the difference between sales comparison approach and cost approach?

The sales comparison method relates the estimated value of the subject property to similar properties that have recently sold in the same market. … Instead, the cost approach estimates the property value as the value of its components, the underlying land, and the depreciated value of the improvements.

What are the two types of adjustments An appraiser can make in the sales comparison approach?

The Sales Comparison Approach compares recently-sold local similar properties to the subject property. Price adjustments are made for differences in the comparable and subject property.

What is the cost approach on an appraisal?

In the cost approach, the value of a property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation in the structures from all causes.

Under what circumstances might an appraiser use a 15% adjustment?

If an appraisal is performed for mortgage qualification, the appraiser may be restricted from making adjustments in excess of a certain amount, for example, anything in excess of 10-15% of the sale price of the comparable. If such an adjustment would be necessary, the property is no longer considered comparable.