Why do real estate professionals and appraisers use comparables in their evaluations?

The correct answer is rooted in the principle of substitution, which is fundamental in real estate appraisal. This principle states that a property's value is essentially determined by what it would cost to acquire a substitute property with similar utility and features, as opposed to its intrinsic qualities. By using comparable properties, or "comps," appraisers can determine a value estimate based on the prices of similar properties that have recently sold in the same market.

This approach helps to establish a fair market value based on empirical data rather than solely on the unique aspects of a single property. It ensures that appraisers' valuations are grounded in the realities of the market, giving a clearer picture of what buyers are willing to pay for properties like the one being evaluated.

The other principles mentioned relate to different aspects of real estate valuation. The principle of competition focuses on the dynamics of supply and demand in the market, while the principle of conformity pertains to the idea that properties achieve their highest value when they conform to the standards of the surrounding properties. The principle of depreciation deals with the loss of value over time due to wear and tear or obsolescence. While these principles are important in the broader context of real estate, they do not specifically address the use of comparables in the appraisal process