How does the sales comparison approach estimate a property’s value?

The sales comparison approach estimates a property’s value by analyzing the sale prices of comparable properties that have recently sold in the same market. This method rests on the principle of substitution, which suggests that a buyer will not pay more for a property than the cost of acquiring an equally desirable substitute. By identifying similar properties, typically known as "comps," appraisers can make adjustments based on differences such as size, condition, location, and features that might affect value. This comparative analysis allows for a more relevant and accurate estimation of the subject property's market value, reflecting real market conditions and buyer behavior.

This approach is fundamentally rooted in current market activity, making it the most preferred method for valuing residential properties, as it is based on actual sales data.