The Improvement And Application Of The Market Comparison Approach In Real Estate Valuation

Market comparison approach is one of the most important methods in real estatevaluation. It is widely used because it’s easy to understand and the valuation result is close tothe market. By selecting comparable examples in the market according to certain principlesand adjusting factors based on the utility theory and substitution principle, the price of the realestate to be estimated is obtained.This paper summarizes the problems of the traditional market comparison approach andmakes improvement research based on the basic principle, valuation formula, the applicablescope as well as the valuation process of the traditional market comparison approach. Firstly,the comparable examples are selected subjectively in the traditional market comparisonapproach. Secondly, factor revision process is too simple without considering the weightproblem. Thirdly, methods of determining valuation results are lack of basis.By using The Gray Relational Degree Model, the correlation degree between real estateto be estimated and comparable examples to be selected can be calculated. Then thecomparable examples can be selected objectively. By using The Entropy Weight Method, theweight of each factor is determined according to the variation degree, which the factors’impact on real estate price to be estimated is taken into consideration. Eventually, byweighting the adjusted prices of comparable examples on correlation degree, this paperenhances the scientificalness and objectivity of market comparison approach.A case study is carried on based on the mathematical model created by the paper. Use asecond-hand housing in the community of Zhongji Liyu in Shijiazhuang, Hebei Province,which further demonstrates the feasibility and operability of the model established in thispaper. The limitations of this paper are as follows. Firstly, the scores’ of qualitative factorsrely on experience of appraisers, in which subjectivity exists. Secondly, since the assessmentdata acquired is limited, this paper analyses a application instance by the improved valuationmodel instead of verifying it with large sample date, which limit the application of the model.These problems need to be solved in the future research.