What principle guides an appraisal when comparable sales are unavailable?

When comparable sales are unavailable for an appraisal, the principle of income potential is utilized to estimate a property's value. This approach is particularly significant for investment properties, where the focus shifts from what similar properties have sold for to the income that the property can generate over time.

Income potential examines the expected income that a property could produce, typically through rental income, and applies a capitalization rate to determine its value. This method helps appraisers and investors assess the viability and financial performance of properties where direct sales comparisons are not possible, providing a way to derive value based on operational metrics rather than market transactions.

While market value can guide appraisals using comparative sales data, in its absence, the income approach becomes relevant. Fair use pertains more to intellectual property and zoning allowances, while replacement cost refers to the cost of constructing a similar property, neither of which directly addresses valuation in the context of income-generating properties lacking comparable sales data.