The Sales Comparison Approach Method
The Sales Comparison Approach indicates value by analyzing recent sales (or offering prices) of properties that are similar (i.e., comparable) to the subject property. If the comparable data is not identical to the properties being appraised, the selling prices of the comparable items are adjusted to equate them to the characteristics of the properties being appraised. The reliability of this technique is dependent upon the degree of comparability of each property with the property under appraisal; the time of the sale; the verification of the sale data; and the absence of unusual conditions affecting the sale.
This approach focuses on the actions of actual buyers and sellers. In theory, the Sales Comparison Approach measures the loss in value from all forms of appraisal depreciation and obsolescence that are inherent in the individual asset, assuming appropriate adjustments are made to the comparables to reflect differences between them and the subject.
Like the Cost Approach, the Sales Comparison Approach assumes that the informed purchaser would pay no more for a property than the cost of acquiring a comparable property with the same utility.