Which method involves comparing similar properties that have recently sold to estimate value?

The method that involves comparing similar properties that have recently sold to estimate value is the Comparative Market Analysis (CMA). This approach relies on analyzing the sale prices of comparable properties, often referred to as "comps," which have similar characteristics, locations, and amenities to the property being appraised. The goal is to derive an accurate value based on real market data from properties that have recently transacted.

CMA is commonly used in residential real estate and is particularly useful because it reflects current market trends and conditions. The adjustments made for differences among the comparable properties enable a more precise estimate of the property in question.

The other methods mentioned have distinct focuses: the Income Approach is primarily used for investment properties, where potential income generation is analyzed; the Cost Approach estimates value based on the cost to replace or reproduce the property; and the Residual Approach is a development-focused method for estimating value based on projected income minus costs. Each of these has its applications, but they do not involve direct comparisons of similar properties in the way that a CMA does.