Chapter 22 – Direct Comparison (Comparative) and Cost Approaches of Apprasial

 

Comparative Method

 

 

  • Also known as the Market
  • Method Estimates are based on:

 

o Similar Properties

o Recently Sold

 

  • This is known as the “Principle of Substitution”
  • Properties used for comparison purposes need to be looked at arm’s length and must be

 

typical and usual

 

  • If the property is not similar, adjustments must be made so that the properties are alike

 

 

Analysis of a Market Transaction

 

 

  • Compare the selling price
  • Listing price is not a good indication because owners typically list high
  • At least 3 previous sales need to be considered
  • MLS and Land Titles are good sources of current prices for property
  • An Imperfect Market is a market where similar properties sell for more or less than that of their market value

 

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