What is the sales comparison approach primarily used for?

The sales comparison approach is primarily focused on estimating property value by comparing it to similar properties that have recently sold in the same area. This method relies on the principle of substitution, which suggests that a buyer will not pay more for a property than the price of a comparable property in a similar location with similar features.

By analyzing the sale prices of these comparable properties, appraisers can adjust for differences in size, condition, and amenities to arrive at a fair market value for the property in question. This approach is particularly effective in active real estate markets where sufficient data from comparable sales are available. It provides a clear and market-driven indication of property worth based on actual transaction prices, which is crucial for buyers, sellers, and lenders in making informed decisions.

Other options are not applicable because they pertain to different aspects of property valuation or analysis, such as construction costs, future market predictions, or depreciation calculations, none of which are the primary focus of the sales comparison approach.