Commercial Appraisals and the Need for Reliable Comps

Comps, also known as comparables is a term used in real estate appraisals and it refers to the properties that have features similar to the property that is being appraised. Comps are identified by the real estate appraiser or by the surveyor using special methods as well as through market analysis and they are relied on to establish the value of the property being appraised.

Comps being an essential component of the final value estimate, their reliability is critical for the correctness of the final figure, that’s why experts use multiple factors when determining them:

• Physical comparability – comps are evaluated in terms of condition, size, age and quality;
• Market condition – also called time adjustment, this type of evaluation looks at comps from the point of view of how their prices change over time;
• Conditions of sale – comps are being evaluated in terms of sales transactions that have taken place recently;
• Financing conditions – comps are also evaluated based on financing terms that influenced the transaction in order to allow the appraiser to adjust the calculations and to determine the appraised property’s value correctly and accurately.  Using a new commercial appraisal software can help the appraiser to be more accurate and include everything necessary to give a precise appraisal.
• Locational comparability – the comparables are also evaluated in terms of the similarity of the location characteristics.

Originally Posted on: Commercial Appraisals and the Need for Reliable Comps