What kind of market data is essential in the sales comparison approach?

In the sales comparison approach, the most critical market data consists of the sales prices of similar properties. This method relies on the principle of substitution, which suggests that a buyer will not pay more for a property than they would for a comparable alternative. By examining the sale prices of properties that are similar in size, location, and characteristics, appraisers can establish a baseline value for the subject property.

Sales prices provide direct evidence of what buyers have been willing to pay in the current market, making them a reliable indicator of value. This data helps to account for the current market conditions, trends, and buyer preferences, which are vital for an accurate valuation. On the contrary, other options like tax assessments, rental rates, or costs of materials and labor do not directly reflect the market dynamics affecting property sales and thus are less relevant for this specific approach to valuation.