Which approach to value considers the thoughts of buyers and sellers?

The market approach to value is the method that primarily considers the thoughts and behaviors of buyers and sellers in the marketplace. This approach uses comparable sales data—actual transactions of similar properties—to determine the value of a property based on what buyers are willing to pay and what sellers are willing to accept. The fluctuations in market conditions, buyer demand, and seller motivations play crucial roles in this method, making it particularly aligned with observable market transactions.

While the income and cost approaches are valuable valuation methods, they focus on different aspects. The income approach emphasizes the potential income that a property could generate, often relevant in investment properties, while the cost approach estimates value based on the cost to replace or reproduce the property, considering depreciation. These methods do not directly reflect the perceptions and negotiations taking place in the marketplace, as the market approach does.

Therefore, while all three approaches can contribute to the overall valuation process, the market approach distinctly focuses on buyer and seller sentiments, making it the most relevant choice when considering those perspectives.