Real Estate Appraisal Practice Exam

What valuation method used by real estate professionals is most similar to the sales comparison approach used by appraisers?

1. Appraisal report.

2. Comparative market analysis.

3. Cost approach valuation.

4. Investment property analysis.

The correct answer is: Comparative market analysis.

The valuation method that aligns most closely with the sales comparison approach utilized by appraisers is the comparative market analysis. This method involves evaluating similar properties that have recently sold in order to establish a fair market value for a property in question. By analyzing the sale prices of comparable properties, real estate professionals can derive a reasonable estimate of value, similar to how appraisers approach valuations through comparable sales. This method places significant emphasis on current market data, much like the sales comparison approach, which relies on the principle of substitution—suggesting that a buyer would not pay more for a property than they would for a comparable one. Thus, the comparative market analysis effectively mirrors the methodology used by appraisers when assessing property values. The other options, while valuable in their respective contexts, do not share the same foundational principles with the sales comparison approach. An appraisal report summarizes findings and methodologies rather than executing direct comparisons. The cost approach involves estimating the cost to replace a property and does not focus on comparability with recent sales. Investment property analysis centers around income potential and investment metrics, which diverges from comparing recent sale transactions.