Legal Definitions - similar sales

Similar sales refers to recent transactions involving properties or assets that share key characteristics with the property or asset currently being valued. These transactions are used as a benchmark to estimate the fair market value of the subject property or asset. Appraisers and valuators analyze these comparable sales, making adjustments for any differences, to arrive at an informed and defensible valuation.

Here are a few examples illustrating the concept of similar sales:

• Residential Real Estate: Imagine a homeowner wants to sell their three-bedroom, two-bathroom house in a suburban neighborhood. To determine a competitive asking price, their real estate agent would research other three-bedroom, two-bathroom homes that have recently sold within the same neighborhood or a very similar adjacent one. The agent would focus on properties with comparable square footage, lot size, age, and condition that closed within the last six months. These recent transactions are considered similar sales and provide crucial data for pricing the homeowner's property accurately.

• Commercial Business Valuation: A small, independent bookstore owner is looking to retire and sell their business. A business appraiser would not just look at the bookstore's financial statements, but also research the recent sales of other independent bookstores in towns or cities of similar size, with comparable revenue streams, customer bases, and operational structures. These transactions, even if they involved bookstores in different locations, would be analyzed as similar sales to help establish a fair market value for the bookstore being sold.

• Collectible Art Appraisal: An individual inherits a painting by a lesser-known but recognized artist and needs to have it appraised for estate purposes. The art appraiser would research recent auction results and private sales of other works by the same artist, or by artists of similar stature working in the same period and style. The appraiser would look for pieces of comparable size, medium, subject matter, and condition. These documented sales of other artworks are the similar sales that inform the valuation of the inherited painting.