What does the sales comparison approach primarily rely on?

The sales comparison approach is a widely used method in real estate valuation that primarily relies on recent sales of comparable properties. This approach involves analyzing the sale prices of similar properties in the same vicinity that have been sold recently to determine a fair market value for the property in question. By comparing attributes such as location, size, condition, and amenities, appraisers can establish a price that reflects current market conditions.

This method is particularly effective in residential real estate where many similar properties exist within a given market. It essentially reflects the principle of substitution, suggesting that a buyer would not pay more for a property than they would for a similar one in the same area. Utilizing recent sales data ensures that the valuation is based on up-to-date market activity, making it a reliable indicator of property value.

In summary, the sales comparison approach is grounded in real-world transactions, which provides a clear and relevant context for establishing property value.