Which method is commonly used for valuing residential properties?

The Sales Comparison Approach is widely recognized as the most appropriate method for valuing residential properties because it reflects the principle of substitution, which suggests that a rational buyer would not pay more for a property than the price of a comparable property that has recently sold. This approach involves analyzing the sale prices of similar properties in the same market area to derive a value estimate for the subject property.

By looking at comparable sales, assessors can account for differences in features, dimensions, and conditions that may affect value. This approach is particularly effective in residential real estate, where properties often have many similar characteristics, allowing for straightforward comparisons. In markets with active sales, this method provides a reliable estimate of market value, making it favored among assessors for residential properties.

In contrast, the Income Approach, while valuable for income-generating properties like apartments or commercial real estate, is less applicable to residential homes that are not typically investment properties. The Cost Approach focuses on the cost to replace a structure, which may not accurately reflect current market trends. The Gross Rent Multiplier Approach is applicable in rental markets but does not provide a comprehensive valuation for owner-occupied homes. Thus, the Sales Comparison Approach is the most suitable for residential property valuation.