What is a "Sales Comparison Approach" in property appraisal?

The Sales Comparison Approach is a fundamental method in property appraisal that estimates value based on the sale prices of comparable properties that have recently sold in the same area or market. This approach operates under the principle that similar properties, when sold under similar conditions, will yield similar values.

By analyzing properties that are akin in characteristics, such as location, size, condition, and amenities, appraisers can determine a fair market value for the subject property being appraised. Adjustments may be made to account for differences between the subject property and the comparables, ensuring a more accurate value assessment.

This method is widely used in residential real estate due to the abundance of data from recent sales, making it highly reliable. It is grounded in current market activity, unlike approaches that rely solely on historical data or that apply specific formulas for select property types, which may not capture the true market nuances. The focus on comparative analysis reflects real-time market conditions, making it an essential tool for appraisers in determining property value.