Which valuation method involves estimating the value based on similar recent sales?

The Sales Comparison Method involves estimating the value of a property by comparing it to similar properties that have recently sold in the same area. This method hinges on the premise that a property's value can be determined by looking at what other similar properties have sold for, adjusted for differences between the properties.

In applying the Sales Comparison Method, real estate professionals will typically analyze a selection of comparable homes, called "comps," assessing how they align with the subject property in terms of size, location, condition, and features. Adjustments are made for any variances that could influence price, ensuring that the final estimate represents a well-informed valuation grounded in real market data. This method is widely used due to its direct link to the actual market conditions and buyer behavior, making it a reliable approach for determining market value.

Understanding this method is crucial for real estate agents and appraisers as it aids in setting competitive prices for listings, negotiating sales, and ensuring that appraisals reflect true market activity.