Which concept describes estimating value by comparing recent sales of similar properties?

Which concept describes estimating value by comparing recent sales of similar properties?

• A. Replacement Cost Analysis
• B. Sales Comparison Analysis
• C. Income Capitalization
• D. Cost Approach

Answer: (B)

Estimating value by comparing recent sales of similar properties uses the sales comparison approach. This method rests on the idea of substitution: buyers determine value by what similar properties have sold for in the current market. You identify recently sold homes that are alike in size, condition, features, and location, then make adjustments for any differences (like a updated kitchen or a premium school district) to arrive at an estimated value for the property you’re assessing. This approach is especially common for residential properties because there are usually plenty of comparable sales to guide the estimate. Other methods estimate value from different angles: replacing what it would cost to rebuild the property (cost approaches, including replacement cost) and analyzing the income a property can generate (income capitalization for investment properties).

Estimating value by comparing recent sales of similar properties uses the sales comparison approach. This method rests on the idea of substitution: buyers determine value by what similar properties have sold for in the current market. You identify recently sold homes that are alike in size, condition, features, and location, then make adjustments for any differences (like a updated kitchen or a premium school district) to arrive at an estimated value for the property you’re assessing. This approach is especially common for residential properties because there are usually plenty of comparable sales to guide the estimate. Other methods estimate value from different angles: replacing what it would cost to rebuild the property (cost approaches, including replacement cost) and analyzing the income a property can generate (income capitalization for investment properties).