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Simple English definitions for legal terms
market-comparison approach
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A quick definition of market-comparison approach:
The market-comparison approach is a way to figure out how much a piece of real estate is worth. It involves looking at other similar properties that have recently sold and making adjustments for any differences between them, like location or size. This helps determine a fair price for the property being appraised. It's also called the comparative-sales approach or market-data approach.
A more thorough explanation:
The market-comparison approach is a method used to appraise real property. It involves surveying the market and comparing the property to similar pieces of property that have been recently sold. Appropriate adjustments are made for differences between the properties, including location, size of the property, and the dates of sale.
For example, if a house is being appraised using the market-comparison approach, the appraiser will look at other houses in the same area that have recently sold. They will compare the size, location, and features of those houses to the house being appraised. If the house being appraised has a larger yard or more bedrooms than the other houses, adjustments will be made to the sale price of the other houses to reflect those differences. This will give the appraiser an idea of what the house being appraised is worth.
The market-comparison approach is one of three methods used to appraise real property. The other two methods are the cost approach and the income approach.