Determining Value through the Market Comparison Method is done by comparing the amounts of similar and comparable real estate transactions obtained by knowledge of the local market or by prospecting that has been carried out.

The necessary corrections are made according to the characteristics of the area and the real estate, regarding the prospecting obtained, taking into account differences such as location, access roads, urban listings, dimensions, state of preservation, etc., to obtain the amount that best translates into the real value of the property.

Application of the market comparison method should observe the following requirements:

• Income Method – Direct capitalisation

The units that are leased or may be leased are applied. The value of the property is translated by the relationship between the current/future income and the expected capitalisation rate.

The value is obtained by the formula V = I/r , in which V translates into the value of the property, I is the income generated by the property and r is the expected rate of capitalisation.

• Income Method – Discounted Cash Flow

This is applied to properties that generate income, or to the valuation of properties that will generate different incomes during different periods. The Value of the property thus determined is based on an analysis of the profitability generated by the development project considered, translated by the Net Present Value of the inherent future benefits.

The costs inherent to managing the real estate or developing the project, as well as the indirect expenses (costs for financing, the project, marketing, etc.) are deducted from the potential gross income of the property. Thus, the future net income is deducted in the time period considered, at a fixed rate, which reflects the expected profitability and the risk inherent to possession of the property or development of the project considered.

In the case of evaluating land for construction, to obtain the Residual Value of the land, the costs of promotion and management should also be deducted.

By the cost method, the estimated value corresponds to the cost of construction of a property that meets the same functions as the property that is the subject of the valuation. If costs are considered referring to the use of current technologies and materials, this is known as substitution cost; if costs are considered referring to the use of technologies and materials identical to those in the property being appraised, they are known as replacement cost.

From the value of the property thus obtained should also be deducted an amount corresponding to physical depreciation or obsolescence of the property.