The Sales Comparison Approach relies primarily on which principle, stating that similar properties should set value?

• A. Anticipation
• B. Supply and Demand
• C. Substitution
• D. Conformity

Answer: (C)

Substitution is the fundamental idea driving the Sales Comparison Approach. The value of a property is determined by the price at which a similar substitute would sell under similar conditions. In practice, an appraiser compares recently sold properties that match the subject closely and adjusts their sale prices for any differences (such as size, condition, or amenities) to infer what the subject would likely fetch in the market. This logic rests on buyers choosing the most comparable option available, so prices of similar properties set the benchmark for value in the market. Anticipation, supply and demand, and conformity describe other market forces or valuation influences, but they don’t capture the mechanism by which similar properties establish value in this approach.