Direct comparison is an approach in appraisal analysis based on the proposition that an informed buyer will pay no more for a property than the cost of acquiring another existing property with the same utility. This is the method that realtors most often use when determining the current market value of a home.
It is the best approach when an active market provides sufficient quantities of reliable data that can be verified from authoritative sources.
The other two approaches to value are the:
Cost approach: the house is worth what it costs to build it (plus the land) and the
Income approach: this approach is used when appraising income producing properties. It capitalizes net operating income into a value estimate.
I’m Keith Marshall, a realtor with Royal LePage Grand Valley Realty, serving Cambridge, Kitchener and Waterloo. If you’re thinking of buying or selling a home, please give me a call. I aim to take the stress and mystery out of the home buying and selling process. Please call 519.729.4116 or email [email protected] with your comments or questions.
– Real Estate Encyclopedia