What does the Sales Comparison Approach primarily rely on?

The Sales Comparison Approach primarily relies on comparing the subject property to similar properties that have recently sold. This method is grounded in the principle of substitution, which posits that a buyer will not pay more for a property than they would for a comparable one with similar characteristics and amenities. By analyzing the sale prices of similar properties within the same market area, appraisers can derive a value for the subject property that reflects its market standing based on real, observable transactions.

This approach is particularly effective in residential real estate where properties are often alike in terms of size, style, and location. The appraiser adjusts the sale prices of these comparables to account for differences, thus arriving at a more accurate valuation for the subject property. This method also provides a clearer picture of what buyers are willing to pay in the current market, making it a crucial tool in the appraiser's toolkit. The reliance on active market data ensures that the valuation is relevant and reflective of current conditions, which is essential for establishing a fair market value.