Which approach to appraised value relies on comparing similar property sales?

The sales comparison approach is a widely used method in real estate appraisals that directly compares the subject property to similar properties that have recently sold in the same area. This approach is grounded in the principle of substitution, which states that a buyer will not pay more for a property than the cost of acquiring an equivalent substitute property.

To apply the sales comparison approach, an appraiser gathers data on recently sold properties that are comparable to the subject property in terms of size, location, condition, and features. Adjustments are then made for differences between the properties to arrive at an appraised value that reflects the current market conditions. This method is particularly effective in active real estate markets where sufficient comparable sales data is available, enabling appraisers to establish a reliable estimate of a property's market value based on actual transactions.

Factors such as the location and time of sales, as well as differences in property features, play critical roles in this approach, allowing for a tailored and accurate assessment of value based on current market trends and buyer behavior.