Appraisal Project Real Estate Valuation

Sales Comparison Approach

• Principal • Substitution principle

• One price rule – equivalent goods tend to sell for equivalent prices

• Approach • Identify sales of similar properties

• Adjust sale prices to reflect differences from the subject property

• Typical adjustments include sales date, size, age, condition, location, amenities and key features

Sales Comparison Approach

• Most applicable when

• Reflects buyers and sellers analysis

–Owner-Occupied (vs. rental income) property

• Plentiful sales data of similar properties

–Active market

–Similarity of comparable sales

–Reliability of comparable sales information

• Direct Market Evidence is preferable to a complex approach

Sales Comparison Approach

• Least applicable when

• Not used by buyers and sellers

–Income producing property, typically purchased for investment

• Valuing a unique property

• Few comparable sales

Sales Comparison Approach

• Research comparable data NOTE: Sales must reflect the same Highest and Best Use (HBU) as Subject – Selection of Comparable Sales

– Verify Transaction data

• Select Unit of Comparison

• Analyze and Adjust Comparable Sales – Qualitative vs. Quantitative

– Dollar Adjustments vs. Percentage Adjustments

– Elements and Sequence of Adjustments

• Conclusions

Research Comp Data: Data Sources

 Professional Networks: Buyers & Sellers, Brokers, Appraisers

 Public records

o Assessor (City of Richmond)

o Transfer tax filings

 Newspapers, journals

Research Comp Data: Data Sources

 Commercial data resources o Real Capital Analytics (www.rcanalytics.com )

o CoStar Group (www.costar.com)

o Xceligent (www.xceligent.com)

o Loopnet (www.loopnet.com)

o MLS (www.mls.com)

o Zillow (www.zillow.com)

o Realtytrac (www.realtytrac.com)

o Redfin (www.redfin.com)

Research Comp Data: Selection of Comps

• Geographically closer is better

• Same neighborhood or similar neighborhood

• Same “market area” – may be quite broad

• Physically similar is better

• Size & design, Lot size, Age, etc.

• Most recent sales better, possible values change w/time

• Residential 6-18 mos., commercial 2-3 years • Time on market - within reasonable range

Research Comp Data: Selection of Comps

• How many Comps are enough? • 3 - 4 is the norm, “any new insights from the

next best comp?”

• Use of “Listings” • Not preferred

• Tends to set an upper limit; Requires adjustment

• Not accepted under certain circumstances