Question 46

Sales comparison method uses recent sales as the only factor to arrive at a value estimate.

The sales comparison method relies solely on recent sales data to determine the value of a property. This approach compares similar properties that have sold recently in order to establish an estimated value based on market activity.

A) cost

The cost method estimates value based on the cost to replace or reproduce the property, considering factors such as construction costs and land value. This method does not use recent sales as its primary factor, making it incorrect in this context.

B) sales comparison

The sales comparison method is indeed the correct approach, as it bases the value estimate exclusively on recent sales of similar properties. This method is widely used in real estate appraisals to reflect current market conditions accurately.

C) income

The income method estimates value based on the income generated by the property, typically using capitalization rates and potential rental income. This approach does not focus on recent sales data, thus making it an incorrect option for this question.

D) capitalization

Capitalization is a method that converts income into value by applying a capitalization rate to the property’s income stream. Similar to the income method, it does not rely on recent sales data, rendering it incorrect for determining value based solely on sales.

Conclusion

The sales comparison method is the only option that directly utilizes recent sales as its sole determining factor for property valuation. All other methods—cost, income, and capitalization—are based on different criteria and do not align with the requirement specified in the question. Therefore, option B is definitively the correct choice.