Which term describes the approach where the true value of property is determined based on the current market?

The term that describes the approach where the true value of property is determined based on the current market is the Comparable Sales Approach. This method involves looking at the sale prices of similar properties in the same area that have recently sold to ascertain the market value of the property in question. It is grounded in the principle of substitution, which asserts that a buyer would not pay more for a property than the cost of a similar one, thus relying heavily on current market activities and trends.

The Comparable Sales Approach is particularly useful in residential real estate, where numerous similar properties are available and recent sales can provide an accurate reflection of market conditions. This method ensures that the valuation reflects current market demands and conditions, rather than theoretical or depreciative measures.

In contrast, the Market Approach often broadly encompasses various methods, including the Comparable Sales Approach. The Cost Approach focuses on the cost to replace or reproduce a property, while the Income Approach is primarily for investment properties, assessing value based on income generation potential. Therefore, while elements of market data are considered in these other methods, it is the Comparable Sales Approach that specifically hones in on current market activity to determine property value.