Which factors are considered in the Sales Comparison Approach?

The Sales Comparison Approach is a method used in property valuation that relies on comparing a property to similar properties that have recently sold in the same area. This approach is grounded in the principle of substitution, which asserts that a buyer will not pay more for a property than the cost of acquiring an equally desirable substitute.

Recent sales of similar properties provide the most relevant market data and help establish a fair market value for the subject property. The location is critical because the desirability and value of properties can vary significantly from one neighborhood to another. Size is also an important consideration, as larger properties typically command higher prices. Condition is essential in the sales comparison, as properties that require more repairs may sell for less than comparable properties in good repair.

Thus, recent sales of similar properties, location, size, and condition make up the essential elements of the Sales Comparison Approach, ensuring that the valuation reflects current market conditions and comparable market activity.