Which method is considered the most direct way of estimating property value?

The sales comparison approach is regarded as the most direct way of estimating property value because it relies on 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 equal utility. This method involves comparing the subject property to recently sold properties that are similar in characteristics, such as location, size, and amenities. By analyzing these comparable sales, appraisers can derive a value range that accurately reflects the current market conditions.

Using recent sales data provides a real-world perspective on what buyers are actually willing to pay, making this approach particularly reflective of current market dynamics. It effectively captures the essence of supply and demand as seen in the local market, offering a straightforward and practical valuation method. Because it relies on tangible, market-based evidence, the sales comparison approach is often seen as the most reliable and direct way to estimate the market value of a property.

Other methods like the income approach or cost approach may incorporate varying elements that can complicate the estimation process, as they factor in aspects like expected income or replacement cost, respectively, rather than a straightforward comparison to actual sales in the market.