The appraisal approach that estimates value by comparing a property to similar recently sold properties is the:

The sales comparison approach is fundamental to real estate valuation because it reflects the actual market behavior of buyers and sellers. This approach matters because it's often the most reliable indicator of a property's current market value, which is crucial for listings, purchases, financing, and tax assessments. The question tests your understanding of the three primary appraisal approaches: cost, income, and sales comparison. The key phrase in the question is 'comparing a property to similar recently sold properties,' which directly describes the sales comparison approach. To arrive at the correct answer, you must recognize that this approach relies on market data rather than construction costs (cost approach) or income potential (income approach). This question might be challenging for students who confuse the sales comparison approach with the gross rent multiplier approach, which is a simplified income valuation method. Understanding these approaches connects to broader real estate knowledge about market analysis, pricing strategies, and appraisal principles that underpin nearly all real estate transactions.