When an appraiser relies on comparable properties for estimating the market price of a property, which approach is being used?

The approach being used when an appraiser relies on comparable properties to estimate the market price of a property is the sales comparison approach. This method involves analyzing the sale prices of similar properties in the same area to determine a reasonable value for the subject property. By comparing characteristics such as location, size, amenities, and condition of the properties, the appraiser can assess how these factors influence market behavior and thus establish a market value.

The sales comparison approach is widely used because it reflects current market conditions and buyer behavior, making it particularly relevant in active real estate markets. It allows the appraiser to derive a value based on observable transactions rather than theoretical calculations, lending credibility to the appraisal process.

Other approaches, such as the cost approach and income approach, are applicable in different scenarios but do not specifically involve comparing similar properties in this manner. The cost approach estimates a property's value based on the cost to replace or reproduce it, while the income approach focuses on the potential income generation of an investment property. The term "market value" generally refers to an estimated price in a competitive and open market, but it does not specify the method of determining that value as the sales comparison does.