What is a commonly used technique for estimating the value of a property that's based on the value of comparable properties?

The sales comparison approach is widely utilized in real estate appraisal because it relies on the principle of substitution, which suggests that a buyer will not pay more for a property than the cost of purchasing a comparable substitute in the market. This method involves analyzing recent sales of similar properties within the area to establish a baseline value.

By comparing the properties, appraisers can adjust the values based on differences in features, conditions, location, and any other relevant factors that might affect pricing. This approach is particularly effective in residential settings where ample data on similar properties is generally available, allowing for accurate and relevant comparisons.

In contrast, the cost approach focuses on calculating the cost to construct an equivalent building and subtracting depreciation. The income approach estimates value based on the income a property generates, often used for investment properties. Market analysis, while relevant to assessing broader economic trends and property values, does not specifically focus on adjustments made from comparing similar property sales. Thus, the sales comparison approach effectively captures the market value by reflecting current market conditions as evidenced by comparable sales.