THE SALES COMPARISON APPROACH

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# THE SALES COMPARISON APPROACH - PowerPoint PPT Presentation

Chapter 8. THE SALES COMPARISON APPROACH. CHAPTER TERMS AND CONCEPTS. Adjustment techniques Assessment Roll Bracketing Buyer ’ s motives Central tendency Comparable sale Comparable sale search area. Competitive property Concessions Linear and multiple regressions Location Mean

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## THE SALES COMPARISON APPROACH

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Presentation Transcript

Chapter 8

THE SALES COMPARISON APPROACH

CHAPTER TERMS AND CONCEPTS
• Assessment Roll
• Bracketing
• Central tendency
• Comparable sale
• Comparable sale search area
• Competitive property
• Concessions
• Linear and multiple regressions
• Location
• Mean
• Median
• Mode
CHAPTER TERMS AND CONCEPTS
• Open-market transaction
• Physical characteristics
• Public records
• Range
• Sales comparison approach
• Sales history
• Sample
• Seller’s motives
• Standard deviation
• Submarket
• Terms of sale
• Variables
• Verification
LEARNING OUTCOMES

List and explain the four steps in the sales comparison approach.

Explain the important concepts behind this approach.

Explain how to decide if a sale is comparable.

Discuss what information about a comparable sale should be collected.

Identify the major sources of market data.

Outline the statistical techniques appraisers can use to analyze sales.

SALES COMPARISON APPROCH
• Collect Comparable Sales
• MLS, Public Record, Commercial databases
• Analyze and Compare them to the Subject Property
• Adjust for Differences between the Sales and the Subject (market adjustments)
• Arrive at a Value Opinion for Subject Property
Key Concepts of the Sales Comparison Approach

• The importance of substitution

• The simplicity of market comparisons

• The relationship to statistics

• The significance of market data

SIGNIFICANCE OF SALES COMPARISON APPROACH
• Based upon the Principle of Substitution
• Simple, Direct and Reliable
• Has Statistical Connections
• Includes Methods for Adjusting for Property Differences
• Provides Data for Other Approaches
• Income and cost approaches
STATISTICAL CONNECTIONS

Samples Market Activity

Identifies Market Patterns

Brackets the Value

Indicates the Most Probable Price

SELECTING THE COMPARABLE SALES
• The Competitive Property
• Same neighborhood?
• Define search area
• Open-Market Transactions
• Listed in MLS?
• Date of Sale
• Close to date of valuation
SELECTING THE COMPARABLE SALES
• How Comparable?
• Square footage, # bedrooms, # baths
• Design, age, & amenities
• Sales History of Subject
• Three years prior to date of value
COMPARABLE SALES DATA
• Transaction Data
• Date of sale
• Sales price and terms
• Legal description
• Grantor and grantee
• Personal property included
• Motivation of Parties
• Physical Data
• Land: Size, shape, topography, utilities available
• Improvements: size & type, quality, condition, special features, any problems
COMPARABLE SALES DATA
• Legal Data
• Zoning
• Taxes and assessments
• Public and private restrictions
• Location
• Comparability
• Detrimental influences
• Market Conditions
• General state of the market
• Availability of financing
TESTS OF COMPARABILITY
• Each Comparable Sale Should Be
• A competitive property
• An open market transaction
• Close in time to the date of value
MARKET DATA SOURCES
• Public Records
• Multiple Listing Services (MLS)
• Private/Commercial Data Services
• Title Insurance Companies
• Parties to the Transaction
• Appraisers’ Files
DATA RESOURCES ON THE INTERNET
• Websites of Government Agencies
• General data on the economy
• Regulatory information affecting real estate
• Websites of Industry Service Organizations
• Industry trends and guidelines
• Construction cost estimating services
• Market data banks, appraisal support
DATA RESOURCES ON THE INTERNET
• Member information services
• General information for the public
APPRAISAL STATISTICAL CONCEPTS
• Central Tendency
• Mean = Average value or price
• Median = Middle value or price
• Mode = Most common value or price
• Range = Difference between high and low value
• Standard Deviation = Description of how values differ from the mean
• Linear and Multiple Regression
• Can Calculate relationships between property features and property price
• Can Suggest value of the subject property
SUMMARY
• The sales comparison approach is one of the three approaches used to estimate value. The main feature of the sales comparison approach is the process of analyzing sales and comparing them to the subject property, based on the principle of substitution. The
• sales comparison approach consists of four steps.
• 1. Research the sales.
• 2. Analyze the sales.
• 3. Adjust the sales for differences between
• the sales and the subject property.
• 4. Arrive at a value estimate.