Tuesday March 24, 2026 Class #14

 SALES COMPARISON APPROACH

CHAPTERS 20, 21 & 22


Sales Comparison Approach (Market Approach)


 The Sales Comparison Approach is a valuation methodology in which the appraiser derives an opinion of value by comparing the subject property to similar properties that have recently sold, are listed for sale, or are under contract in the relevant market. The approach is based on the principle of substitution, which holds that a prudent buyer will not pay more for a property than the cost of acquiring a comparable substitute with equivalent utility.

In applying this approach, the appraiser:

  • Identifies relevant comparable sales and listings
  • Verifies transactional and physical data
  • Analyzes market conditions and elements of comparison
  • Applies quantitative and/or qualitative adjustments
  • Reconciles the adjusted indications into a final value conclusion

Under USPAP Standards Rule 1-4(a), when a Sales Comparison Approach is necessary for credible assignment results, the appraiser must analyze such comparable sales data as are available to indicate a value conclusion.


Today's Outline

I. INTRODUCTION & FOUNDATION 

A. Role in the Three Approaches to Value

  • Sales Comparison Approach (Market Behavior)
  • Income Approach (Investment Behavior)
  • Cost Approach (Replacement Logic)

B. When the Approach is Most Applicable

  • Owner-user properties
  • Residential real estate
  • Vacant land
  • Active markets with sufficient data

C. USPAP Requirements

  • Standard Rule 1-4(a)
  • Scope of Work considerations
  • Credibility and data sufficiency

II. PRINCIPLE OF SUBSTITUTION 

A. Economic Foundation

  • Buyers compare alternatives
  • Rational market behavior

B. Real-World Example (Teaching Case)

  • Retail strip center vs. competing center
  • Dental office vs. competing medical space

III. DATA COLLECTION & VERIFICATION

A. Sources of Comparable Data

  • MLS systems
  • County records (DeKalb, Cobb, Fulton)
  • CoStar / LoopNet
  • Brokers, buyers, sellers

B. Verification Process

  • Confirm sale price and terms
  • Confirm motivations and conditions
  • Identify non-market influences

C. USPAP Compliance

  • Requirement for credible data
  • Avoidance of unsupported conclusions

IV. ELEMENTS OF COMPARISON (CORE SECTION) 

A. Standard Elements (MAI Framework)

  1. Property Rights Conveyed
  2. Financing Terms
  3. Conditions of Sale
  4. Expenditures After Purchase
  5. Market Conditions (Time)
  6. Location
  7. Physical Characteristics
  8. Economic Characteristics
  9. Use / Zoning

B. Typical Adjustment Grid (Your Preferred Format)

  • Financing Terms
  • Condition of Sale
  • Sale Date (Time Adjustment)
  • Location
  • Size (SF or acreage)
  • Condition / Age
  • Garage / Parking
  • Utility / Layout

EXAMPLE:







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