Which appraisal approach assesses properties similarly based on sales history?

Which appraisal approach assesses properties similarly based on sales history?

• A. Cost Approach
• B. Income Approach
• C. Sales Comparison Approach
• D. Market Survey Approach

Answer: (C)

The Sales Comparison Approach is utilized in property appraisal by evaluating similar properties, often referred to as comparables or "comps," which have recently sold in the same market area. This approach relies on the principle of substitution, which posits that a buyer will not pay more for a property than the cost of acquiring an equally desirable substitute property. By examining the sales history of these comparable properties, appraisers can derive a fair market value for the property in question. This method is particularly effective in residential real estate, where the characteristics of properties are similar and sales history data is abundant. Factors such as location, size, condition, and amenities of the properties being compared help determine an appropriate value for the subject property. As a result, this approach directly reflects real market conditions and recent sales trends, making it a critical tool for appraisers. The other approaches have different methodologies. The Cost Approach estimates value based on the cost to develop a property, including land and construction expenses, rather than its sales history. The Income Approach is focused on properties generating income, analyzing potential earnings to establish value, while the Market Survey Approach is less common and may not have as direct a connection to appraising individual property values based on sales data.

The Sales Comparison Approach is utilized in property appraisal by evaluating similar properties, often referred to as comparables or "comps," which have recently sold in the same market area. This approach relies on the principle of substitution, which posits that a buyer will not pay more for a property than the cost of acquiring an equally desirable substitute property. By examining the sales history of these comparable properties, appraisers can derive a fair market value for the property in question.

This method is particularly effective in residential real estate, where the characteristics of properties are similar and sales history data is abundant. Factors such as location, size, condition, and amenities of the properties being compared help determine an appropriate value for the subject property. As a result, this approach directly reflects real market conditions and recent sales trends, making it a critical tool for appraisers.

The other approaches have different methodologies. The Cost Approach estimates value based on the cost to develop a property, including land and construction expenses, rather than its sales history. The Income Approach is focused on properties generating income, analyzing potential earnings to establish value, while the Market Survey Approach is less common and may not have as direct a connection to appraising individual property values based on sales data.