When utilizing the Sales Comparison Approach, what is primarily based upon?

The Sales Comparison Approach primarily relies on recent sales of comparable properties to determine the value of a subject property. This method involves analyzing the sale prices of similar properties within the same geographic area that have sold recently. By comparing these properties, appraisers can estimate the market value of the property in question.

This approach is grounded in the principle of substitution, which states that a rational buyer would not pay more for a property than the cost to purchase a similar one of equal utility. Therefore, using the most relevant and recent sales data provides actionable insights into current market conditions and pricing trends. The emphasis on comparable sales allows appraisers to reflect current market dynamics and buyer preferences effectively, leading to a more accurate property valuation.

In contrast, options that mention the cost to build the property or historic property values do not directly inform about the current market price that buyers are willing to pay. Local market demographics provide context but do not directly correlate with sales prices in the same way that recent comparables do. Thus, focusing on recent sales ensures the appraisal reflects current market realities.