The sales comparison approach is based primarily on the principle of ___________, which states that a prudent purchaser will pay no more for a property than he or she would pay for a similar or comparable property.

• A. Conformity
• B. Substitution
• C. Progression
• D. Regression

Answer: (B)

At the heart of the sales comparison approach is the idea of substitution: a prudent purchaser won’t pay more for a property than they would pay for a similar or comparable one. In practice, appraisers identify recently sold, similar properties and compare them to the subject property, making adjustments for differences in size, condition, features, location, and market timing. The goal is to estimate value by what a willing buyer would choose as a substitute, keeping the price aligned with that level of comparability.

The other principles describe how value responds to the market context rather than the fundamental basis of comparison. Conformity deals with value moving toward the neighborhood or market norms, progression suggests lower-valued properties gain value when near higher-valued properties, and regression suggests higher-valued properties lose value when surrounded by lower-valued ones. These illustrate market dynamics, but the foundational method for determining value in this approach is substitution.