Which of the following methods is most commonly used to estimate the value of residential properties?

The Market Approach, also known as the Sales Comparison Approach, is the most commonly used method to estimate the value of residential properties because it directly analyzes recent sales data of similar properties to determine a market value. This approach operates under the principle of substitution, which suggests that a buyer would not pay more for a property than the cost of purchasing a comparable substitute in the same area.

In residential real estate, the market approach relies heavily on the availability of comparable sales, which provide essential data points to gauge how much buyers are willing to pay for similar homes in the neighborhood. This can include factors like square footage, location, age of the property, and recent renovations. By assessing the prices at which comparable homes have sold, appraisers can arrive at a value for the subject property that reflects current market conditions.

Other methods like the Cost Approach and the Income Approach serve specific purposes and generally apply to different types of properties. The Cost Approach is often used for new constructions or unique properties where comparable sales data is limited, while the Income Approach is primarily applicable to investment properties, where potential income generation is critical for valuation. Comparative Analysis, although related, typically refers to the process used by agents and buyers to evaluate options rather than a formal appraisal method. Hence,