Valuing Real Estate through the

Sales Comparison Approach

Paul Kerley, Salem Oregon

Introduction

Previously a real estate broker in Oregon, Paul Kerley is the president and owner of Commercial Property Resources, Inc., in Salem. From the company’s inception in 1983, Paul Kerley has steadily augmented its portfolio to over 1,400 residential units.

Real estate valuation is an important factor in real estate financing, listing, sale, taxation, and insurance. The value of real estate is the present worth of future benefits to be enjoyed as a result of owning the property. Because real assets are enjoyed over time, real estate is valued differently than consumer goods.

One of the methods of valuing real estate is the sales comparison approach.

Valuing Real Estate

This approach estimates the value of real property by comparing it with similar properties sold in the market recently. For a good estimate, the properties sold must be very similar to the subject property and have been sold in the past year under typical market conditions.

Because properties can never be completely similar, adjustments are made to the sale values of the similar assets to cater to dissimilarities in age, date of sale and associated economic conditions, precise location, and physical features such as lot size, square feet of living space, and landscaping. These adjustments may be weighted in case some are more subjective than others.