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.