The comparison approach, also known as the sales comparison approach, is a standard method for determining property value by comparing the subject property to similar properties (comps) that have recently sold. Below is a summary of the process:

Step 1: Research Comparable Properties
Identify similar properties (referred to as “comparables” or “comps”) that have recently sold within the same or a nearby area. These properties should share similar characteristics such as size, location, condition, and features to provide meaningful comparisons.

Step 2: Analyze Comparable Sales
Evaluate the sales prices of the identified comparable properties. Adjustments are needed to account for differences between the subject property and the comps. For instance, if one of the comparable properties has an extra bedroom, its price may be adjusted downward to align with the subject property.

Step 3: Make Adjustments
Adjust the value of the comparables for differences such as age, condition, location, or features. For example, if one property has a pool or an upgraded kitchen and the subject property does not, the value of the comparable will be adjusted accordingly.

Step 4: Estimate the Property Value
Once adjustments are made, the adjusted prices of the comparables are averaged or analyzed to provide a value estimate for the subject property.

Step 5: Final Evaluation
The result is a reasonable market value estimate of the property, reflecting both current market conditions and data from comparable property sales.

This approach is particularly effective in residential real estate because it uses real-world market data, offering an accurate reflection of fair market value.