Which appraisal method is predominantly used for residential properties?

The Sales Comparison Approach is predominantly used for residential properties because it relies on the principle of substitution, which posits that a potential buyer will not pay more for a property than they would for a comparable one available on the market. This method evaluates recent sales of similar properties in the same area to establish a fair market value for the subject property.

In residential real estate, where properties often share numerous similarities in terms of size, features, and location, this approach allows appraisers to find relevant comparables that have sold recently, providing a strong basis for estimating value. By closely examining these recent sales data, appraisers can assess adjustments that account for differences between properties, leading to a more accurate valuation.

Other appraisal methods can have their applications, but they are generally less effective for residential valuations. For example, the Cost Approach focuses on the cost to build and may not reflect current market conditions accurately if the market is appreciating or depreciating significantly. The Income Approach is typically utilized for commercial properties that generate rental income rather than residential homes, which do not generally produce consistent income streams for owners. The Market Analysis Method is more of a broad assessment or study rather than a formal appraisal approach and lacks specific standardized valuation techniques. Hence, the Sales Comparison Approach remains the most