In order to determine the value of a particular
property, investors and usually commercial
property buyers compare
similar property sales in order to establish the correct
current market value. They look at the comparable sales
because they show exactly what the property was sold for,
not just the asking price. By looking at a couple of properties
with the same characteristics as yours which were sold
for the same amount, then you can establish what the value
is for your property. The asking price won’t help,
as it can be the owner’s choice and may be very
far off from what the property is worth or what it was
sold for.
Comparable sales, also known as Comps, are the properties
that have sold around the subject property, and are zoned
identically with about the same amount of acreage. It
also helps if the comparable sales are from properties
that have similar uses to the property in question. 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, may not have the same characteristics
such as the availability of utilities, or may not have
a comparable amount of road frontage or acreage, or could
be in a different area from the subject property. These
factors will all affect the value of the property compared
to your property. The best way to avoid this problem is
to use the property that is closest to your area and simply
alter the price according to the changes in the market
or property characteristics.
For example, if a comparable sale was from 2000, and
the current year is 2007, then you can adjust the price
according to the appreciation the overall commercial market
has experienced in a specific area. Also if the comparable
sale property is 800 feet and your property is 400 feet
the price can be altered as appropriate.
As you can see, finding the true current market
value of a property can take some research and may
include alterations 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 your property. It definitely
helps to collect as many comparable sales as possible
and take an inventory for each one. What is the square
footage of the property? What area is it situated in?
Assess each one individually and then group them together
to determine an overall compromise. You should be able
to determine the current market value at this point. The
more properties you have to compare, the more accurate
the final value will be.
More often then not, brokers
or agents provide 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 cautious of the comps that they send you. There have
been occasions when a seller has received comps of properties
in the most prosperous areas for a subject property that
was positioned in a lower to medium class area. This completely
misrepresented the true market value of the property.
Had this not been examined further, the seller could have
easily taken this property as an accurate comparable sale,
and would have expected a far greater asking price and
sale price than what they would actually have received.
Comparable sales are really the only way to determine
accurately the true value to a property. It may mean that
a comp from another area or even another county is necessary
to find out what the most accurate value is. Find
a broker or agent you know you can definitely trust
to help you. They know the market better than anyone and
will be able to give you good advice and answers.
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