The Sales Comparison Approach estimates property value based on what criterion?

The Sales Comparison Approach estimates property value based on what criterion?

• A. Cost of construction
• B. Recent sales of similar properties
• C. Projected income generation
• D. Location desirability

Answer: (B)

The Sales Comparison Approach is a widely used method for estimating property value that involves comparing the subject property to similar properties that have recently been sold in the same market. This approach relies on the principle of substitution, which suggests that an informed buyer would not pay more for a property than they would for a similar one that has sold recently. Therefore, the most critical factor in this method is the analysis of recent sales of comparable properties. When appraisers utilize this approach, they consider various aspects of each comparable property, such as location, size, condition, and features, and then adjust the values of these properties to reflect differences with the subject property. By doing so, they can derive a fair market value that is well-grounded in actual transactions in the area. This makes the Sales Comparison Approach particularly effective in active real estate markets where similar properties are frequently bought and sold, reinforcing the reliability of this valuation method.

The Sales Comparison Approach is a widely used method for estimating property value that involves comparing the subject property to similar properties that have recently been sold in the same market. This approach relies on the principle of substitution, which suggests that an informed buyer would not pay more for a property than they would for a similar one that has sold recently. Therefore, the most critical factor in this method is the analysis of recent sales of comparable properties.

When appraisers utilize this approach, they consider various aspects of each comparable property, such as location, size, condition, and features, and then adjust the values of these properties to reflect differences with the subject property. By doing so, they can derive a fair market value that is well-grounded in actual transactions in the area. This makes the Sales Comparison Approach particularly effective in active real estate markets where similar properties are frequently bought and sold, reinforcing the reliability of this valuation method.