Which principle is the primary principle associated with the Sales Comparison Approach methodology?

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

Answer: (A)

Substitution is the driving concept behind the Sales Comparison Approach. This method estimates value by comparing the subject property with recently sold, similar properties. The market principle is that a prudent buyer won’t pay more for the subject than the price of a reasonably close substitute. So the appraiser adjusts for differences between the subject and each comparable property to reflect what the market would pay for those differences, keeping the subject’s value in line with the prices of substitutes. Anticipation, progressions/regressions, and supply-and-demand influence market values in general, but they’re not the primary force that drives the Sales Comparison Approach.