The market-comparison approach, also known as the comparative-sales approach or market-data approach, is a method used to determine the value of a piece of real estate. It involves analyzing recently sold properties that are similar to the property being appraised and making adjustments for any variations, such as location or size. This approach assists in establishing a fair price for the property.
The market-comparison approach is a valuation method for real property that involves analyzing the market and comparing the property to recently sold similar properties. Adjustments are made for variations in location, property size, and sale dates. For instance, when appraising a house using this approach, the appraiser examines recently sold houses in the same area, comparing their size, location, and features to the house being appraised. If the house being appraised has a larger yard or more bedrooms, adjustments are made to the sale prices of the other houses to account for these differences. This approach provides an estimate of the value of the house being appraised. The market-comparison approach is one of three methods used for real property appraisal, alongside the cost approach and the income approach.
The Market-Comparison Approach is a method used in real estate appraisal to determine the value of a property by comparing it to similar properties in the same area.
The Market-Comparison Approach works by analyzing the sales prices of similar properties in the same area and adjusting for any differences in size, condition, location, and other factors.
The advantages of using the Market-Comparison Approach include its simplicity, accuracy, and reliability. It is also widely accepted by real estate professionals and lenders.
The limitations of using the Market-Comparison Approach include the availability of comparable properties, the accuracy of the data used, and the potential for bias in the selection of comparable properties.
To determine the value of a property using the Market-Comparison Approach, you need to identify comparable properties in the same area, analyze their sales prices, and make adjustments for any differences in size, condition, location, and other factors.
The factors considered when making adjustments in the Market-Comparison Approach include the size of the property, the condition of the property, the location of the property, the age of the property, and any other relevant factors.
A property is considered comparable in the Market-Comparison Approach if it is similar in size, condition, location, and other relevant factors to the property being appraised.
The Market-Comparison Approach can be used for most types of properties, including residential, commercial, and industrial properties.
The accuracy of the Market-Comparison Approach depends on the availability and accuracy of the data used, as well as the skill and experience of the appraiser.
A licensed real estate appraiser or a certified real estate appraiser can perform a Market-Comparison Approach appraisal.
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This glossary post was last updated: 17th April 2024.
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