Valuations Without Distress

Anyone who has tried to value distressed properties over the past few years knows the stress and difficulty in the process. After a fair amount of effort and frustration, you may have felt that the value you came up with was just a shot in the dark. What approaches work well and what do they entail? Let’s look at some traditional approaches to valuing real estate, including some concerns and benefits of each.

A natural first step in valuing a property is to look at comparable sales in the marketplace. The principle of substitution seems like a reasonable thought, but transaction volumes have fallen drastically in recent years. While deal activity may have picked up recently in some markets, a dearth of actual sales has been the norm. Plus, some would argue that the few sales that do occur are, by nature, distressed sales.