What does the Sales Comparison Method utilize to assess depreciation?

The Sales Comparison Method assesses depreciation by utilizing comparable sales of properties. This method is based on the principle of substitution, which posits that a property’s value can be assessed by comparing it to similar properties that have recently sold in the market. By analyzing these comparable sales, appraisers can determine a baseline value for a subject property and identify any depreciation that may exist based on differences in condition, age, or other factors compared to the sold properties.

In this method, the appraiser looks for properties that are similar in size, location, and features and notes the sale prices of those properties. Any depreciation in value for the property being appraised can then be assessed by observing the prices of similar properties that may have been affected by market trends, location desirability, or necessary repairs, thus allowing for a direct comparison to arrive at a fair market value.

The options that involve construction costs or estimated income relate to different valuation approaches (cost approach and income approach) and do not directly focus on the market perspective that the Sales Comparison Method emphasizes.