The market data approach is primarily based on?

The market data approach is primarily based on?

• A. Replacement cost of improvements.
• B. Comparison of recent sales of similar properties with adjustments.
• C. Income potential of the property.
• D. Appraisal of future rent.

Answer: (B)

The market data approach relies on recent sales of comparable properties in the same area and adjustments for differences. It uses the principle of substitution—buyers compare similar properties and will pay a price that reflects what those comparable properties sold for, with adjustments made for any differences in size, condition, age, features, or location. When there are enough comparable sales, this approach provides a market-based estimate of value grounded in actual transaction data. The other methods come from different viewpoints. Replacing the improvements at cost is the focus of the cost approach, which estimates value based on how much it would cost to reproduce or replace the property. Considering income potential or future rent belongs to the income approach, which bases value on the property's ability to generate income.

The market data approach relies on recent sales of comparable properties in the same area and adjustments for differences. It uses the principle of substitution—buyers compare similar properties and will pay a price that reflects what those comparable properties sold for, with adjustments made for any differences in size, condition, age, features, or location. When there are enough comparable sales, this approach provides a market-based estimate of value grounded in actual transaction data.

The other methods come from different viewpoints. Replacing the improvements at cost is the focus of the cost approach, which estimates value based on how much it would cost to reproduce or replace the property. Considering income potential or future rent belongs to the income approach, which bases value on the property's ability to generate income.