Sales comparison valuation is a real estate appraisal method that estimates a property’s value by comparing it against other properties with similar attributes that have been sold recently. This approach considers all of the individual features of a property, adjusting the value to reflect a sum of all the property’s features. A sales comparison approach may be used to evaluate both commercial and residential property.
For example, a broker is tasked with establishing the value of a 4 BD/3 BA home built in 2016 in Austin, Texas. Looking to other homes with the same number of bedrooms and bathrooms within the same school district, the broker has established a base price of $480,000. Newer, and with a bigger backyard than its comparables, the broker feels as though the price should be adjusted upwards to account for these two favorable attributes. After looking at pricing of land, as well as premiums on properties built within the last two years, the broker comes to the conclusion that the fair market value of the home should be $510,000.