Direct comparison is an approach in appraisal analysis based on the proposition that an informed buyer will pay no more for a property than the cost of acquiring another existing property with the same utility. This is the method that realtors most often use when determining the current market value of a home.
It is the best approach when an active market provides sufficient quantities of reliable data that can be verified from authoritative sources.
The other two approaches to value are the:
Cost approach: the house is worth what it costs to build it (plus the land) and the
Income approach: this approach is used when appraising income producing properties. It capitalizes net operating income into a value estimate.
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– Real Estate Encyclopedia