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Simple English definitions for legal terms
market approach
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A quick definition of market approach:
The market approach is a way to figure out how much a property is worth by looking at other similar properties that have recently sold. The appraiser compares the property being appraised to these other properties and makes adjustments for any differences, like location or size. This method is also called the comparative-sales approach, market-comparison approach, or market-data approach. It's different from the cost approach and income approach.
A more thorough explanation:
The market approach is a method used to appraise real property. It involves surveying the market and comparing the property to similar pieces of property that have been recently sold. Appropriate adjustments are made for differences between the properties, including location, size of the property, and the dates of sale.
For example, if a house is being appraised using the market approach, the appraiser will look at other houses in the same area that have recently sold. They will compare the size, location, and other features of those houses to the house being appraised. If the other houses sold for more or less than the house being appraised, adjustments will be made to the value of the house being appraised.
The market approach is one of three common methods used to appraise real property. The other two methods are the cost approach and the income approach.