You need to know – What is the sales comparison approach to valuation?

YouNeedToKnowWeb500The sales comparison approach to valuation is based upon the principal of substitution and is one of the three main approaches to value

Used mainly for single family residential properties and vacant land, value is estimated by studying the sale price of similar (comparable) properties, and adjusting the comparables to the characteristics of the subject property

If a comparable is superior to the subject, the comparable value is adjusted downwards

If a comparable is inferior to the subject, the comparable is adjusted upwards

The adjusted prices of the comparable are reconciled into an estimated value of the subject using a weighted average