Sales Comparison method estimates depreciation based on what?

The Sales Comparison method estimates depreciation primarily by analyzing the amount of depreciation suffered by comparable sales. This approach involves comparing the subject property to similar properties that have sold recently in the market. By examining these sales, appraisers can identify how much value has been affected by factors like age, condition, and any improvements or deficiencies.

When appraisers analyze recent comparable sales, they can discern the typical depreciation that properties in similar condition and location have experienced. This allows them to make more informed judgments about the depreciation related to the property they are appraising. This method reflects real market behavior rather than theoretical calculations, making it particularly reliable in active markets where ample data is available.

In contrast, while considerations like improvement costs, market demand, or the property's age can play roles in understanding overall property value, they do not directly measure the depreciation as effectively as the comparative analysis of sales data does. The focus of the Sales Comparison method is specifically on how the market has responded to similar properties, making the analysis of depreciation from comparable sales the most relevant.