Which approach to value is most appropriate for single-family homes and vacant lots?

The sales comparison approach is most appropriate for valuing single-family homes and vacant lots because it relies on the principle of substitutability. This approach compares the property in question to similar properties that have recently sold in the same area, adjusting for differences in characteristics such as size, amenities, and condition. The goal is to establish a fair market value based on actual sales data, which is highly relevant for residential properties where market activity can be observed.

This method is particularly effective for single-family homes and vacant lots, as it provides an accurate reflection of what buyers are willing to pay in a competitive market. Since residential real estate often has a sufficient number of comparable sales, the sales comparison approach allows for a thorough analysis of market trends and property values.

Other approaches, such as the cost-depreciation and income capitalization methods, may be more suitable for different types of properties. The cost-depreciation approach is generally used for properties that are not frequently sold, while the income capitalization approach is primarily focused on investment properties that generate rental income. The liquidation value approach is used in situations where a quick sale is necessary, which is less common for typical residential transactions. Thus, the sales comparison approach stands out as the most practical and effective method for estimating the value