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Sales Comparison Approach (SCA)

Reviewed by Bhavana | Updated on Sep 30, 2020

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What Does Sales Comparison Approach (SCA) Mean?

SCA is a real estate appraisal approach, which compares a property to other similar properties recently sold. The approach takes into consideration the effect individual features have on the overall value of the property. In other words, a property's total value is the sum of all of its characteristic values. Appraisers and real estate agents might employ SCA during the process of evaluating properties for selling purposes.

How to Apply SCA?

It is essential to note that SCA is not an official evaluation, and in case a property is unique, a formal assessment may be required. Even though there are several steps a real estate appraiser can take in assessing the value of a property, some of the most common ones are listed below:

  • Recently Sold Listings: The geography of where the real estate is situated, and the local topography situation will directly affect the value applied to all comparable properties.

  • Features of Houses for Sale with Similar Ones: A house needs to be compared against properties that comprise the same number of garages, bathrooms, and bedrooms.

  • Age/Condition of the Residential Property: Compare the building with those of similar age, and in case it's an older building, check if it needs upgrades.

  • *Calculate an Average Price per Square Foot: *After the properties with similar age, geographies, and characteristics are put together, take each of their selling prices and divide them by their square footage. The result of the sales comparison study would yield the cost per square foot based on the properties in the sales comparison analysis.

  • Location/Neighborhood: The geography of the area of the real estate and the condition of the local topography might have a direct effect on the value assigned to all comparable properties.

How Does SCA Help?

SCA allows real estate practitioners and consumers to assess whether a house's price is fair and competitive with the current market.

SCA is used as the basis for comparative market analysis, which is an analysis of the prices of assets recently sold that are comparable within the same geographical area. This approach, in other words, often involves looking at local properties to see what they have in common.

Appraisers can then determine a value for a property based on its characteristics. This avoids using less reliable methods, such as comparing property sales over a broader geographic area by analyzing properties within the same venue.

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