Sales Comparison Approach Overview
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Sales Comparison Approach Overview

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@MarvellousFeynman

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Questions and Answers

Which element of comparison addresses whether a sale was conducted as an arm's length transaction?

  • Conditions of sale
  • Real property rights conveyed
  • Non-realty items included in the sale
  • Market conditions (correct)

    • What should an appraiser consider when adjusting for repairs needed after a sale?

  • Difference between the listing price and the sale price
  • Expenses anticipated by the buyer and seller at the time of the transaction
  • Actual amount spent by the buyer to make the repairs
  • Amount similar repairs would cost on the effective date of the appraisal (correct)

    • In a residential appraisal, most adjustments are primarily based on which type of differences?

  • Physical characteristics (correct)
  • Real property interest conveyed
  • Financing terms
  • Neighborhood features

    • Paired data analysis in real estate appraisal is classified as which type of measurement technique?

    <p>Quantitative measurement technique</p> Signup and view all the answers

    Which adjustment factor is NOT relevant when comparing two comparable properties?

    <p>Units of measurement</p> Signup and view all the answers

    What is an element of comparison in real estate transactions?

    <p>Any aspect of a transaction that may affect the sales price</p> Signup and view all the answers

    Which of the following is NOT a necessary step in the sales comparison approach?

    <p>Negotiating the sale price</p> Signup and view all the answers

    When selecting units of comparison, which can NOT be used?

    <p>Total volume of the property</p> Signup and view all the answers

    What is the primary goal during the reconciliation step of the sales comparison approach?

    <p>To estimate the subject property's value range</p> Signup and view all the answers

    What factor could influence the price paid in a real estate sale?

    <p>Financing terms</p> Signup and view all the answers

    How many comparables are typically required for a robust sales comparison approach?

    <p>Three</p> Signup and view all the answers

    Which of the following best describes 'conditions of sale' in real estate?

    <p>The motivations of the buyer and seller during the transaction</p> Signup and view all the answers

    What is the primary reason for rejecting a comparable property?

    <p>It has a different highest and best use.</p> Signup and view all the answers

    Which element of comparison might require price adjustment if included in a sale?

    <p>Non-realty items</p> Signup and view all the answers

    What is the first step in the sales comparison approach?

    <p>Measure differences between comp and subject property.</p> Signup and view all the answers

    Which of the following describes qualitative measurement in comparing properties?

    <p>It indicates if a property is better, worse, or the same.</p> Signup and view all the answers

    What does the sales comparison approach utilize as reference points to determine market value?

    <p>Comps’ sales prices.</p> Signup and view all the answers

    Which element of comparison relates to the terms under which the sale is financed?

    <p>Financing terms</p> Signup and view all the answers

    Which of the following types of adjustments is used to express differences quantitatively?

    <p>Total costs in dollar amounts</p> Signup and view all the answers

    What should an appraiser do if the subject property is sold with non-realty items?

    <p>Adjust the price of the comparable sale accordingly.</p> Signup and view all the answers

    Study Notes

    Sales Comparison Approach

    • Comparable sales must be from the same market and compete with the subject property
    • Requires a minimum of three recently sold comparable properties from the same market
    • The appraiser should verify the data gathered and evaluate the similarity to the subject property

    Steps in the Sales Comparison Approach

    • Data collection and verification
      • Appraiser must gather data on comparable properties in the market and evaluate how similar they are to the subject property
      • The appraiser must verify the data to understand if the circumstances of the transaction are typical
    • Selecting units of comparison
      • The unit may be an acre, square foot, front foot, or the entire property
    • Analyzing and adjusting comparables
      • Appraiser identifies elements of comparison that may affect the value of the subject property
      • Appraiser makes price adjustments to comparables based on differences
    • Reconciliation
      • The appraiser estimates where the subject property’s value lies in the range of values
      • Not a simple averaging of the indicators; weight is given to comparables that are more similar to the subject property

    Elements of Comparison

    • Any aspect of a property transaction that may affect the sales price
    • Elements of comparison typically include:
      • Real property rights conveyed: should include the same rights as the subject property (e.g., fee simple interest)
      • Financing terms: financing terms can affect price paid (seller-financed below-market interest rate may lead to higher price)
        • Cash equivalent: financing terms should not affect the price paid for the property
      • Conditions of sale: refers to buyer and seller motivations in a transaction; should be normal market conditions
        • Property offered in a competitive and open market
        • Buyer and seller acted prudently and knowledgeably
        • No undue stimulus or unusual pressure on either party
        • Comps with similar zoning restrictions, water rights, etc., generally have similar highest and best use
      • Anticipated expenditures: expenses anticipated by the buyer and seller
      • Market Conditions: economic factors at the time of sale
      • Location: physical location and features
      • Physical characteristics: size, condition, and features
      • Factors affecting use: land use regulations
      • Non-realty items included in sale: if the subject property is being sold with non-realty items, the appraiser normally ignores them, however if the comp sale included them, then the price must be adjusted

    Analyzing Comparable Properties

    • Measuring differences:
      • Qualitative measurement - Differences stated in terms of comparable being superior to, inferior to, or the same as the subject property
      • Quantitative measurement - Differences stated in terms of dollar amounts or percentages
    • Analyzing Relationship:
      • Consider how similarities/differences affect the relative values of properties.
    • Indication of Value:
      • Use the analysis to come up with an indication of the subject property’s market value, using comps’ sales prices as a reference point

    Qualitative vs. Quantitative Measurement

    • Qualitative: Measures differences between comparables and the subject property in terms of superior, inferior, or the same.
    • Quantitative: Measures differences in dollar amounts or percentages.

    Paired Data Analysis

    • A quantitative measurement technique used to determine the value of a specific feature of a property

    • Uses “matched pairs” of properties that are alike in all respects but one

    • The value of the difference in the two properties is reflected in their selling prices

    • Not discussed in the text, but helpful for understanding paired data analysis:

      • Common characteristics: The ideal matched pairs should be similar in every possible way except the one characteristic being compared
      • Significant relationship: The matched pairs should show a significant relationship between the specific characteristic and the difference in selling price

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    Related Documents

    Sales Comparison Approach to Value PDF

    Description

    This quiz covers the Sales Comparison Approach used in real estate appraisal. It emphasizes the importance of using comparable sales, data verification, and making necessary adjustments to property values. Test your understanding of the steps involved in accurately assessing property values through this method.

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