What approach is used to estimate the sales value of a property based on the actual sales price of comparable properties?

The Market Data Approach is the method used to estimate the sales value of a property by analyzing the actual sales prices of comparable properties. This approach operates on the principle of substitution, which suggests that a typical buyer would not pay more for a property than the cost of an equivalent substitute with the same utility. By examining the sale prices of similar properties in the same area, appraisers can derive a value that reflects current market conditions.

This approach is particularly effective in active real estate markets where there is a sufficient volume of sales data available for comparison. Analyzing various characteristics such as location, size, conditions of the properties, and property sales trends helps create a more accurate assessment of value based on real transactions.

In contrast, the Cost Approach focuses on the costs to replace or reproduce the property, while the Income Approach estimates value based on the income-generating potential of a property. The Location Analysis Approach is more about understanding the market attributes of a location rather than directly estimating property values based on comparable sales.