What is the purpose of the Sales Comparison Approach?

The purpose of the Sales Comparison Approach is to compare the subject property with similar properties that have sold recently in the same market. This approach is grounded in the principle of substitution, which posits that a buyer would not pay more for a property than they would for a comparable property with similar features and conditions. By analyzing the sale prices of properties that are similar in location, size, condition, and amenities, appraisers can establish a fair market value for the property in question.

This method is particularly effective in residential real estate, where there are often many comparable properties available for analysis. It helps to ensure that the valuation reflects current market conditions and trends by relying on real transactional data.

The other options focus on different valuation methods or aspects of property analysis that do not align with the core objective of the Sales Comparison Approach. Evaluating construction costs pertains to the Cost Approach, estimating potential rental income relates to the Income Approach, and analyzing historical value trends involves a broader market analysis not specific to comparing similar sales.