The Comparable Sales (Real Estate) Method of Valuation

The ""comparable sales"" method of valuation attributes value to an asset by reference to actual sales of comparable assets or to the market capitalisation of companies with comparable assets. This methodology is widely used in real estate valuations. The real estate approach can be used to value mining and exploration properties where there are actual sales of comparable or similar assets in the recent past. The practical limitations of the comparable sales method are well known and self evident: limited number of transactions, limitations on comparability and inadequate data. The real value of the comparable sales method is in its use as a validity check. Estimates of value of mining and exploration assets are so sensitive to so many variables that all valuation methods have limitations. Accordingly there is real value in attempting to establish benchmarks from comparable sales. Apparently sophisticated valuation methods can mislead by creating the impression that valuation is a precise science. The judgement of the valuer is critical and judgements can be wrong. Any available evidence from actual sales that are even remotely comparable can provide useful input to the valuation process.