What are the steps in the sales comparison approach?

What are the steps in the sales comparison approach?

• A. Select comparables, adjust for differences, analyze adjustments, and reconcile to a value.
• B. List properties, determine cost, calculate GRM, apply adjustments.
• C. Identify land values, estimate depreciation, compute final value.
• D. Estimate NOI, apply cap rate, derive value.

Answer: (C)

The sales comparison approach relies on comparing recent, similar property sales to estimate value, with adjustments for differences between those sales and the subject property. First, you select comparables that closely resemble the subject in location, size, layout, condition, and amenities. Then you adjust each comparable for any differences from the subject—things like lot size, condition, age, features, and even the timing of the sale to reflect market changes. After making these adjustments, you analyze them to ensure they’re reasonable and consistent across the set, looking for any outliers and confirming market support for the adjustments. Finally, you reconcile the adjusted prices from all comparables into a single value indication, often weighting the more similar, higher-quality comparables more heavily and ensuring the final estimate reflects current market conditions. The other approaches focus on different methods (for example, the cost approach emphasizes land value and depreciation, while the income approach relies on net operating income and capitalization rates), which is why this sequence best fits the sales comparison method.

The sales comparison approach relies on comparing recent, similar property sales to estimate value, with adjustments for differences between those sales and the subject property. First, you select comparables that closely resemble the subject in location, size, layout, condition, and amenities. Then you adjust each comparable for any differences from the subject—things like lot size, condition, age, features, and even the timing of the sale to reflect market changes. After making these adjustments, you analyze them to ensure they’re reasonable and consistent across the set, looking for any outliers and confirming market support for the adjustments. Finally, you reconcile the adjusted prices from all comparables into a single value indication, often weighting the more similar, higher-quality comparables more heavily and ensuring the final estimate reflects current market conditions. The other approaches focus on different methods (for example, the cost approach emphasizes land value and depreciation, while the income approach relies on net operating income and capitalization rates), which is why this sequence best fits the sales comparison method.