What is a fundamental principle behind the Sales Comparison Approach?

The Sales Comparison Approach relies on the idea that the value of a property is fundamentally linked to what similar properties have sold for in the current market. This approach involves comparing the subject property to recently sold properties within the same area that share similar characteristics, such as size, location, and amenities. By analyzing these sales, appraisers can determine what buyers are willing to pay for a property under current market conditions.

Market value is dynamic and influenced by various factors including supply and demand, economic trends, and buyer preferences. When utilizing the Sales Comparison Approach, appraisers take into account the most recent sales data to ensure that their valuation reflects the current state of the market. This principle is essential because it emphasizes that property values fluctuate and are ultimately determined by what buyers are willing to pay at a given moment, rather than static factors like original purchase price or the depreciation of properties over time.