Price Adjustments of Price-setting Factors under Sales Comparison Approach (SCA)

Abstract

The sales comparison approach (SCA) usually represents the most important valuation approach. Besides this approach, there are two other performing valuation approaches at other bases. The sales comparison is a set of procedures, in which an appraiser derives a value indication by comparing the property being appraised to similar properties. Real properties vary considerably from one another, which is reflected by price-setting factors. Although price adjustments (caused by differences projected into price by the grid adjustment technique) are always ad hoc, certain relations among the price-setting factors can be detected.The research is based on evaluating price adjustments across different types of real estate. In addition, its objective is to determine the values of simultaneous relations of price adjustments for individual price-setting factors. The methodology consists of three steps. The first one clearly defines the content of individual price-setting factors and price adjustments for further analysis. The second step involves statistical analysis of an extensive appraiser database and evaluation of price adjustments. The final step uses selected statistics to compare the LRM and the SCA and interprets mutual relations.The results of the research should have practical implications for professional appraisal community and further research analyses of the SCA.

Keywords: Sales comparison approach, price-setting factor, price adjustment, real estate;