real estate

Market/data approach

A technique of valuing or evaluating real property that is based on the concept that an educated purchaser would pay no more for a property than the cost to him or her of obtaining an existing property with the same usefulness as the one being appraised or evaluated. This strategy is useful in situations in which an active market have the capability of providing enough amounts of trustworthy data that can be independently validated by reputable sources. This method is not very accurate in markets that are not very active and when calculating the value of properties for which there is no genuine sales data that is comparable to other properties. When sales data cannot be confirmed with the parties directly involved in the transaction, this raises additional red flags. This method is also known as the direct sales comparison strategy or the market comparison method.