In which scenario is the sales comparison approach particularly effective?

The sales comparison approach is particularly effective in scenarios involving properties that have many comparable transactions available in the market. This approach relies heavily on the principle of substitution, which states that a buyer will not pay more for a property than what they would pay for a similar one in the same area.

In the scenario of a condo in a complex with high turnover, there are likely to be multiple sales of comparable units occurring frequently. This high volume of similar transactions provides current market data that can be used to determine the value of the condo accurately. The sales comparison method allows for adjustments based on differences between the properties to arrive at a fair market value, making it particularly effective in this context.

In contrast, other scenarios may pose challenges. A commercial building in a residential neighborhood may not have sufficient comparable sales to draw a valid comparison. A recently constructed building with custom features can make it difficult to find comparable properties since the unique features might not have recent, similar transactions. Lastly, a unique, octagon-shaped home in a neighborhood of split-levels presents similar challenges, as its distinct characteristics make it hard to find comparable sales, leading to difficulty in accurately assessing its value using the sales comparison approach.