Which approach to valuation is most commonly used for residential properties?

The sales comparison approach is the most commonly used method for valuing residential properties because it relies on the principle of substitution, which states that a buyer will not pay more for a property than the cost of an equally desirable alternative. This approach compares the subject property with similar properties that have recently sold in the same area, adjusting for differences in features, location, and market conditions.

By considering the sale prices of comparable homes, appraisers can establish a reliable estimate of the subject property's market value. This method is particularly effective in residential markets where properties are similar and sales data is readily available. It reflects the current market trends and buyer preferences, making it more relevant for pricing residential real estate.

In contrast, while the cost approach estimates value based on the cost to rebuild the property, it may not accurately reflect current market conditions, especially in fluctuating markets. The income approach is primarily used for investment properties, where income generation is a key factor in valuation, and the market adjustment approach is not a standard term used in valuation practices.