Which property valuation method is based on the recent sale prices of similar properties?

The Direct Comparison Approach is a property valuation method that relies on analyzing the sale prices of comparable properties in the same area. This method is grounded in the principle of substitution, which posits that a buyer would not pay more for a property than the cost of acquiring an equally desirable substitute. By comparing the sales data of similar properties—often referred to as "comps"—appraisers can determine a fair market value for the property in question.

This method is particularly useful in active real estate markets where there are sufficient comparable sales to derive an accurate valuation. The analyst considers various factors such as location, size, age, condition, and features of the properties being compared. Adjustments may be made to account for differences, ensuring a precise comparison. As such, the Direct Comparison Approach is the most effective way to assess a property's worth based on actual market activity, making it a widely accepted and utilized approach in real estate appraisal.

The other methods, while useful in their own contexts, do not primarily focus on recent sale prices of similar properties. The Cost Approach estimates value based on the cost to replace or reproduce a property, while the Income Approach focuses on the potential income generated by an investment property. The Square Footage Approach usually involves calculating value based