What is comparable value?
Comparable value is the dollar amount that the seller or retailer considers property or merchandise to be worth. This is a highly subjective amount and doesn’t mean that the item has or ever will sell at that price. All in all, this is a comparatively unscientific process and shouldn’t worry anyone who is a buyer or shopper.
Deeper definition
A retailer is planning an advertisement and assigns an item as having a comparable value, or retail value, of a specific dollar amount. This is usually factored in two ways:
- One method is to assign value based on its relation to other items being sold in the area that are similar.
- Another method is to take an average from all similar items being sold in the area.
Still, the amount assigned is often the largest sum at which the item is being sold in an area. This enables the seller to charge the consumer a smaller amount under the guise of offering savings.
Comparable value is also used when appraising real estate. When a seller is pricing his or her house, he or she should determine its comparable value.
For example, if the Smiths are selling a two-bedroom, one-bath home on two acres, they should determine the value of other residences in their neighborhood with two bedrooms and one bathroom on two acres to figure the comparable value of the property. This helps to set the asking price and to ensure that it’s realistic for the area.
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Comparable value example
Taylor is shopping for a recliner and sees this sign in the store on a recliner he likes: “Retail Value — $749.00, Our Price — $499.00.” The price of $749.00 is the comparable value and $499.00 is the price that the seller is offering.
In this example, the comparable value is based on one of two concepts. Either several other merchants in the same area are charging $749.00 for a similar model, or the price for similar models in the area ranges from $599.00 to $900.00, with $749.00 being the average cost.
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