Real Estate Appraisal 2025 – 400 Free Practice Questions to Pass the Exam

The market approach is a widely used method in real estate appraisals that involves comparing recent sales of similar properties, known as comparables or "comps," to estimate the value of a subject property. This approach is grounded in the principle of substitution, which posits that a buyer will not pay more for a property than the cost of acquiring a similar property with comparable utility. By analyzing these recent sales data, appraisers can derive a fair market value for the property in question, reflecting current market conditions.

The other methods have differing focuses: the cost approach estimates value based on the cost to replace or reproduce a property, minus depreciation. The income approach is primarily used for investment properties and measures value based on the income generated by the property, capitalizing expected future cash flows. The term 'name comparison approach' is not a recognized appraisal method, making it less relevant in this context. Therefore, the market approach stands out as the correct method for valuing property through comparison of similar sales.