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The application of the sales comparison approach to complete facility assets deserves special consideration since these facilities possess characteristics that require particular attention during the appraisal process. Complete facilities encompass the physical plant-including the land, buildings and Installed equipment necessary to deliver a product or service. Appraisers must make adjustments in the sales comparison approach to account for the past, current, and future use of a facility's physical elements.
The sales comparison approach as a valuation benchmark has evolved into a cornerstone of the appraisal profession. Consequently, the sales comparison approach has been discussed extensively in appraisal literature by authors writing on valuation theory.
The sales comparison approach uses actual transactions between buyers and sellers to provide a direct indication of value perceptions and to establish asset value. This approach is predicated on the appraiser's ability to identify transactions involving comparable assets to obtain adequate specific information concerning the asset. This article discusses the unique concerns of appraisal of complete facility assets using the sales comparison approach.
The application of the sales comparison approach to complete facility assets deserves special consideration since these facilities possess characteristics that require particular attention during the appraisal process. Complete facilities encompass the physical plant-including the land, buildings, and installed equipment necessary to deliver a product or service. Appraisers must make adjustments in the sales comparison approach to account for the past, current, and future use of a facility's physical elements.
The Sales Comparison Approach
The sales comparison approach establishes an indication of asset value through the identification and analysis of actual transactions involving similar assets among buyers and sellers. Transactional information is the foundation from which insights are developed into investor perceptions of asset value. The search for comparable transactions begins with the establishment of a defined standard of value consistent with the purpose and objective of the appraisal engagement. Standards of value may include market value, investment value, liquidation value, or another defined value concept.
A standard of value provides the initial benchmark for screening comparable transactions. A heterogeneous mixture of transactions involving various standards of value would be an inadequate measure of value and probably would provide an unreasonable indication of value. However, a collection of transactions changing hands under a common standard of...