What does a sales comparison approach rely on to indicate property value?

The sales comparison approach is a widely used method in real estate appraisal that primarily relies on comparisons with recently sold similar properties to indicate property value. This approach is grounded in the principle of substitution, which asserts that a buyer will not pay more for a property than the cost of purchasing a comparable alternative.

By analyzing prices of similar properties that have recently sold in the same market area, appraisers can derive a value estimate for the subject property. This method is especially effective in active real estate markets where there are ample comparable sales data available. Factors such as location, size, condition, and features of the properties are considered in these comparisons to ensure they are genuinely similar.

Unique features of a property, market forecasts, or an owner's cost of ownership might play a role in an overall assessment but are not the foundational basis of the sales comparison approach. Instead, the focus remains tightly on actual transaction data and market behavior, which provides the most accurate reflection of market value for the specific property being appraised.