What is a key strength of the sales comparison approach to value?

The sales comparison approach to value is grounded in the principle of substitution, which asserts that a buyer will not pay more for a property than what they could pay for a similar property with comparable features. This principle is fundamental because it relies on the idea that if two properties are similar, the price of one will serve as a benchmark for the other.

This approach is particularly effective in residential real estate, where there are often many comparable properties in a given neighborhood. By examining recent sales of similar homes and making adjustments for differences in size, location, condition, and features, appraisers derive a range of values that can provide a reliable estimate of market value.

While it may be true that older and newer sales data can be considered to a certain extent, or that neighborhood dynamics can influence appreciation rates, the essence of the sales comparison approach remains its reliance on the principle of substitution to determine value. This principle is what allows the method to be broadly applicable and relevant in real estate assessments.