What approach to appraisal uses market comparables?

The correct answer is the direct comparison approach, which is a method of real estate appraisal that evaluates property values based on the sale prices of similar properties in the area, known as comparables or "comps." This approach relies heavily on analyzing recent sales data of properties that share similar characteristics, such as location, size, and amenities, to determine the value of the property being appraised. By comparing these similar properties, appraisers can more accurately estimate a market value that reflects current market conditions.

In contrast, the income approach focuses on the revenue-generating potential of a property, making it ideal for investment properties. The cost approach evaluates the cost to replace or reproduce the property minus depreciation, which is useful for new constructions or unique properties where comparable data may not be available. The capitalization approach, often linked to the income method, involves converting income into value but does not directly utilize market comparables in the same way that the direct comparison approach does. Each approach serves its purpose in different scenarios, but the direct comparison approach specifically emphasizes market comparables for valuation.