What does the comparable sales approach depend on?

The comparable sales approach relies on the principle of substitution, which posits that a property's value is largely determined by what a buyer is willing to pay for a comparable property in the same area. This principle asserts that a purchaser will not pay more for a property than it would cost to purchase an equivalent substitute that offers similar utility.

When applying the comparable sales approach, appraisers look at recent sales of similar properties to establish a market value for the subject property. If a recently sold comparable home with similar characteristics is priced lower than the property being assessed, this could indicate that the assessed property may also need to be valued lower to remain competitive in the market.

Understanding this principle is crucial for accurately determining property values, as it reflects the direct relationship between buyer behavior and property pricing within a market, effectively guiding transactions and valuations.