A common approach to sales comparison is to use a matrix of significant features and attributes to compare products side-by-side. This matrix enables you to compare products based on their saliency, price, and features. By comparing these attributes and features, you can find the products that are the most valuable to customers. However, this approach has its own limitations. Here are some reasons you should not use this approach. Read on to learn more.
When choosing comparable properties, it is important to choose those that are similar in age, square footage, and location. The comps should be in the same neighborhood as your subject property. Moreover, they should have similar features, including the same schools and neighborhood crime rate. In addition, the two homes should have similar square footage and lot sizes. This will help you determine if you’re offering the right price. It’s also important to remember that the condition of the homes can affect the value.
A sales comparison approach relies on the substitution principle. This basic economic principle states that people would not pay more for the same product from a different seller. This principle applies to property prices as well. However, this principle only applies when comparisons are apples-to-apples. If you’re buying a home in the same neighborhood, you shouldn’t pay more than the equivalent property sold for at another price. So, when making a sales comparison, make sure to compare properties using apples-to-apples criteria.
When comparing properties, it is important to find homes with similar features and age. These comparisons are most accurate when similar homes are compared. Ideally, they should have the same number of bedrooms and bathrooms. You also should consider the size of the homes. A small, modern home may not sell for as much as a smaller Tudor-style home, which might be better aesthetically. Likewise, a large lot or a steeply sloped yard could throw off a sales comparison.
Comparative market analysis (CMA) also uses the sales comparison approach. When comparing properties in the same neighborhood, your appraiser will look at nearby homes and use them to determine their value. This is important because not every home is exactly the same, so it is crucial to make adjustments. This way, you’ll be able to price your home appropriately. But be aware that the valuation of your home is based on the value of homes that sold nearby in the same area.
The sales comparison approach relies on a matrix of attributes, which includes factors such as the number of bathrooms, floor area, and views. It also takes into account other factors such as lot size, age, and condition. While the income approach has some advantages, it’s worth considering the limitations of the sales comparison approach. However, the main disadvantage of this method is that it is subjective and often requires more time to determine the value of a property.