Which appraisal approach relies primarily on comparing recent sales of similar properties?

• A. Cost Approach
• B. Investment Approach
• C. Sales Comparison Approach
• D. Replacement Approach

Answer: (C)

Relying on comparing recent sales of similar properties is the Sales Comparison Approach. This method uses market data from nearby, similar homes that have sold recently to infer value, based on the idea of substitution—buyers won’t pay more for a property than the amount paid for comparable properties in the same market.

To estimate value, an appraiser selects a few recently sold properties that are truly comparable in size, condition, features, and location, then adjusts their sale prices for any differences from the subject property (such as a larger lot, updated kitchen, or newer roof) and for the date of sale to reflect current market conditions. The adjusted prices are then analyzed to derive a value estimate that reflects what buyers are currently willing to pay.

This approach is especially strong for typical residential properties with abundant comparables and up-to-date sale data. It’s less reliable for unique properties or in markets with limited recent sales, where other methods—like a cost-based approach (reproducing or replacing the building plus land value) or an income approach (capitalizing expected net income)—might be more appropriate.