Introduction to the Comparative Unit Method
The Comparative Unit Method is an essential appraisal technique employed to equitably assess the value of various types of real estate properties. By establishing relevant units of comparison, appraisers can determine the market value of a subject property accurately.
Practical Applications of the Comparative Unit Method
This method finds practical application across various property types, helping appraisers derive consistent and accurate valuations.
Example 1: Parking Garages
Valuation is conducted per parking space.
Illustration: A parking garage with 200 spaces, where the market rate per space is $15,000, would be valued at: $$200 ext{ spaces} x $15,000 = $3,000,000$$.
Example 2: Bowling Centers
Valuation is conducted per bowling lane.
Illustration: A bowling center featuring 20 lanes, with a market valuation of $50,000 per lane, can be appraised at: $$20 ext{ lanes} x $50,000 = $1,000,000$$.
Example 3: Land
Valuation may be conducted per square foot or per front foot.
Illustration 1: Land priced at $10 per square foot with a total area of 10,000 square feet $$10,000 ext{ sqft} x $10 / ext{sqft} = $100,000$$.
Illustration 2: A waterfront property priced at $2,000 per front foot with 50 feet of frontage $$50 ext{ ft} x $2,000 / ext{ft} = $100,000$$.
Benefits of Using Comparative Unit Method
- Consistency: Ensures consistent valuation across similar property types.
- Market-Driven: Reflects current market conditions by comparing similar units.
- Simplicity: Offers an easier, understandable approach to complex property evaluations.
Frequently Asked Questions
1. What is the primary advantage of using the Comparative Unit Method?
The biggest advantage is the consistency and simplicity it brings to property appraisals, making it easier to understand and apply.
2. Can this method be misleading in any way?
In unique or highly specialized properties, relying heavily on unit comparisons might not capture the property’s full scope and value accurately.
3. Is this method accepted worldwide?
The Comparative Unit Method is widely accepted and used globally but works best in markets with readily available comparable data.
Conclusion
The Comparative Unit Method stands as a tried-and-true technique in the appraiser’s toolkit, providing reliable, market-reflective evaluations that benefit both buyers and sellers. When used correctly, it streamlines the process of assessing diverse property types, ensuring fair and accurate valuations.
Harness the full potential of the Comparative Unit Method in your property appraisals to bring clarity, consistency, and accuracy to all your real estate valuations.
Related Terms: Appraisal Techniques, Market Value, Income Capitalization Approach, Cost Approach, Sales Comparison Approach.
