What is the primary purpose of the sales comparison approach in appraisal?

The primary purpose of the sales comparison approach in appraisal is to estimate a property's value based on comparable sales. This method relies on the principle of substitution, whereby a property's value is determined by looking at the prices paid for similar properties in the same area that have recently sold. By comparing the subject property to these comparable properties, appraisers can derive a value that reflects current market conditions and buyer behavior.

Using this approach, appraisers analyze differences in features such as location, size, condition, and amenities. The assumption is that buyers will not pay significantly more for a property than they would for a comparable one, thus helping to establish a fair market value based on evidence from actual sales.

While assessing the cost to rebuild, analyzing market trends, or looking into zoning regulations are important factors in the appraisal process, they serve different purposes. The sales comparison approach specifically focuses on deriving value through direct market evidence, making it the most relevant method for estimating property worth based on real-world transactions.