Which principle does the sales comparison approach primarily rely on?

The sales comparison approach primarily relies on the principle of substitution. This principle holds that a informed buyer will not pay more for a property than the cost of acquiring an equally desirable substitute property. In other words, if two similar properties are available, a buyer will typically choose the less expensive one.

In the context of property valuation, the sales comparison approach analyzes recent sales of comparable properties to determine the market value of a subject property. By examining what prices buyers have recently paid for similar properties in the area, appraisers can establish a reliable value for the subject property based on the principle of substitution.

This approach is grounded in the idea that the best indicator of a property's value is the sale prices of comparable properties, thus effectively utilizing market data to reflect current conditions and buyer behavior.