How to Use Comparable Sales to Determine the
Current Market Value of a Property
When assessing the value of a property, many investors and other commercial property buyers look at
comparable sales to determine the true current market value of a property. The comparable sales can
show you exactly what properties are selling for, not just the asking price. If you know three or four
properties of similar characteristics sold for about the same amount, then you can determine what the
value of your property is. Don't ever just look at the asking price, as it can be as far off as the owner
wishes. He or she may be dreaming in regards to what the property is really worth!
Comparable sales, or comps, are the properties that have sold around the subject property that are
zoned identically, and are about the same amount of acreage. It also helps if the comparable sales are
from properties that have similar uses.
Comparable sales may not always be the most accurate for your specific property. They could be from
many years ago, may not be of similar use, many not have the same characteristics such as the
availability of utilities, or may not have a comparable amount of road frontage, or could be a
considerable distance from the subject property.
In order to get around this problem, you must use the closest properties that you can. You simply adjust
the price according to the changes in the market or property characteristics.
For example, if a comparable sale was from 2001, and the current year is 2006, then you can adjust the
price according to the appreciation the overall commercial market has experienced in a specific area.
Or, if the subject property has a total road frontage of 200 feet, and the comparable sale property has
frontage of 1000 feet, you can adjust the price or value appropriately.
As you can see, finding the true current market value of a property can take some investigation and
adjustment in relation to the properties that have sold in the past. The more recent and similar the
comparable sale is, the easier and more accurately you can assess the true value of the property.
It is a good idea to collect as many comparable sales as possible and take inventory of each. What are
the characteristics? What are the uses? Assess each one individually and then group them together to
determine an overall consensus. You should be able to determine the current market value at this point.
The more properties you have to pool from, the more accurate a number you will have.
Very often brokers or agents supply you with comps from the area of interest as part of the service of
selling the subject property. If you are not familiar with the area, you must be leery of the comps that
they send you.
I have received comps of properties in the most affluent areas for a subject property that was positioned
in a lower to medium class area which completely misrepresented the true market value of the
property. Unless I had investigated further and asked many questions, I could have easily taken this
property as a true comparable sale, and would have expected a far greater return than what I really
would have experienced.
Unfortunately, as much as you want to trust the information that you are given by a source, you must
always perform your very own investigation because brokers and agents are there to sell their
properties. Many of them are honest and will do the best they can to give you the most accurate
information. However, there are those who will dupe a buyer in order to sell the property and receive
their commission. It is important to be aware of these tactics. Although we don't like to admit that they
happen, they most certainly do.
Comparable sales are really the only way you can determine the true value of a property. It may take a
comparable from another city, or even county of identical characteristics to determine the most
accurate value. If necessary, ask a trustworthy broker or agent for assistance, as they will know their
market inside and out, and be able to point you in the right direction as to what the property is really
worth. Get two or three opinions in order to validate any information you might receive.
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