A method of estimating value based on a
comparison of the site being appraised, with
the most recent sales data available on
similar sites, preferably in the same
neighbourhood. The assumption is made that,
if the subject site had been vacant and
offered for sale, it would have competed
with the comparable sales and appealed to
the same type of buyer. Six elements of
adjustments are considered when comparing
sites to the subject property:
Rights conveyed by the transaction;
Financing terms;
Motivation of the parties;
Market conditions (time);
Location; and
Physical characteristics.
Select a sufficient number of good
comparable sites that have recently sold
in the area.
Gather all necessary data on these
sites to make a proper comparison.
Compare each of the sales with the
subject for differences that may exist.
Make the necessary adjustments to
the sale price of each comparable based
on those differences.
Reconcile the adjusted sale price of
the comparables into an indication of
value of the subject property.
A method that involves calculating the
known cost per square meter (or its imperial
equivalent), of a newly-constructed building
similar to the subject, and then multiplying
this unit cost by the number of square
meters in the subject structure. The
accuracy of this method depends on the
refinements made by the appraiser to cover
the differences between the properties from
which the unit cost is derived and the
property being appraised.
It would be incorrect to ascertain the
square meter cost of a two-storey house and
apply this unit cost as a basis for
estimating the cost of a bungalow. It would
also be incorrect to apply the square metre
cost of an odd shaped one-storey house to
estimate the cost of a more conventional
structure. To prevent this kind of
inaccuracy, the appraiser ensures that the
properties from which a cost estimate is
derived are truly comparable to the property
being appraised and that all cost estimates
are current and apply as of the effective
date of the appraisal.
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