What property appraisal method estimates value by comparing similar properties' sales prices in the same market area?

The Sales Comparison Approach estimates the value of a property by analyzing the sale prices of similar properties (often referred to as comparables or "comps") in the same market area. This method is grounded in the principle of substitution, which states that a buyer will not pay more for a property than the cost of acquiring a similar property in that same area with similar features and conditions.

Using this approach, an appraiser gathers data on recently sold properties that are comparable to the subject property in terms of size, location, amenities, and other significant characteristics. Adjustments may be made to account for differences, ensuring that a more precise value is established. This method is particularly useful in active real estate markets where ample data on sales transactions are available, making it one of the most commonly used appraisal methods for residential properties.

While the Cost Approach estimates value based on the cost to replace or reproduce the property, and the Income Approach values properties based on the income they generate (common for commercial real estate), the Sales Comparison Approach is specifically targeted toward evaluating residential properties through direct comparisons with the market. Market analysis is a broader term that encompasses various forms of analysis, including but not limited to the sales comparison method. It seeks to gauge overall market trends and conditions rather than