The Sales Comparison Approach
The Sales Comparison Approach is a method used to estimate the value of a property by comparing it to similar properties that have recently sold in the same area. This approach relies on the principle of substitution, which suggests that a buyer will not pay more for a property than the cost of acquiring a similar one with equal utility. Appraisers gather data on comparable properties, known as ‘comps,’ and adjust for differences such as location, size, condition, and features. This method is particularly effective in active markets where there are sufficient recent sales to provide a reliable basis for comparison. By analyzing the sales prices of comparable properties, appraisers can derive an indication of the market value of the subject property. This approach is widely used for residential properties and is one of the three primary methods of property valuation, alongside the Cost Approach and the Income Approach.
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