What is a Comparable Property in real estate valuation?

A Comparable Property in real estate valuation refers to a property that is similar in key characteristics to the subject property being assessed, and is used in the Direct Comparison Approach. In this context, comparable properties are instrumental in determining the market value of the subject property by looking at sales of similar properties in the same area. This approach heavily relies on analyzing recent sales data to make informed assumptions about the value, ensuring that the comparison reflects current market trends and conditions.

When using the Direct Comparison Approach, appraisers look for properties that share attributes such as location, size, age, condition, and style. The information gathered from these comparable properties can provide a benchmark for pricing the subject property accurately based on what buyers are willing to pay for similar homes.

In contrast, properties involved in the Cost Approach focus on the cost to replace or reproduce a property rather than comparing property values in the market, which is why they are not classified directly as comparable properties in this valuation methodology. The other options listed do not effectively describe the function or importance of a Comparable Property in the context of real estate valuation.