MARKET
VALUE – COMPARABLE SALES
The
valuation standard consists of 4 elements:
-
investigating
comparable sales/rental properties
-
selecting
the suitable analytical approach
-
applying
selected analysis techniques to market evidence
-
analysing
market trends and other factors.
INVESTIGATING
COMPARABLE SALES/RENTAL PROPERTIES
The
valuer's continual quest is to find and adjust comparable sales for
use in determining market value. Sales evidence can be classified as
follows:
-
primary
-
secondary
-
tertiary.
See:
primary
sources of information
secondary
sources of information
tertiary
sources of information
WHAT
IS MARKET VALUE?
Just
when we thought the definition of market value was well and truly
decided after Spencer and the modified Spencer (Tuner
and Closer Settlement cases) and JF Murray, academia finds a
number of American textbooks and with the influence of RICS and tries
to change Australian valuation theory.
Yet
Australian valuation theory is simple; market valuer is the willing
buyer and willing seller theory under Spencer . The
Institute can sign as many overseas agreements about international
standards as much as its likes but the practising valuer has to
determine Spencer. Why? because the courts say so.
Australia
has a well tried and working definition of market value that provides
the profession and industry with certainty. Critics say that Spencer
is a normative definition and therefore, must be inferior to a non
normative definition (eg value in exchange). But "normative"
is used as a pejorative term and the willing buyer willing seller
theory would only be inferior if it could not be used for
example, where there are no "ideal" sales available.
However,
the practising valuer knows that there are a number of comparable
sales, many needing only small, and reliable "opportunity cost"
adjustments to make them comparable to the subject property. Too much
emphasis is placed on the quaint 1907 language of Spencer and
modified Spencer should be used instead. Modified
Spencer is basically the use of a sale price that has been
subject to adequate or typical exposure in the market place. This
really, is the only definition of market value required and provides
a good working definition.
.
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