property valuations

Property Valuation: Direct Comparison
Student Name
Institution Affiliation
Property Valuation: Direct Comparison
Property can be evaluated using various methods. Each method has its assumptions and rationale as to why the particular method has been chosen in any given situation. Given the information provided in the relation to the three sales, the best method to determine the value of the other prices are the direct comparison approach and in particular the sales comparison approach. According to this method, the comparison is made between the properties under investigation and properties with similar features that have been sold previously (API, 2015). In this case, the property valued is based on the adjustments made to the properties in relation to the other properties previously sold. The general rationale of using the method is that any potential investor will not pay more for a property that has similar features than the one sold previously (Koropi, 2016).
As far as the assumptions are made, one of the assumptions is in relation to the cost involved. It is assumed that the costs involved in the construction of the previous units are the same as the cost involved in the construction of the current units. An illustration is in the information provided pertaining sale 1 and sale 2. The additional cost for the construction of one additional room is $ 25000. With this in mind, it is assumed that the construction of one bedroom is done as a cost of $ 25000. This cost is applied uniformly for all the houses.

Another assumption made is in relation to the valuation is that there are no market fluctuations affecting the price. Regarding price fluctuations, it is assumed that the same parameters used to determine the market price for the houses is the same as the other houses under investigation.
In summary, the valuation method in use is the direct comparison method. In this scenario, assumptions are made in terms of the market fluctuations and costs. Moving forward, the method will be useful in determining the prices of other similar properties.
References
Koropi, G.S. (2016). Valuation report of a commercial property.
API. (2015). The valuation of real estate, 2nd edition. Canberra: Australian Property Institute.