Which method of estimating value is most influenced by competition?

The method of estimating value that is most influenced by competition is the market approach. This approach relies on comparing the property in question to similar properties that have recently sold in the same area. The underlying principle is that the market determines value based on supply and demand dynamics, which are directly affected by competition among buyers and sellers.

In a competitive market, the selling prices of comparable properties can fluctuate significantly based on how many similar properties are available and how many buyers are looking to purchase. If many buyers are competing for a limited number of properties, prices tend to rise. Conversely, if there are too many properties available relative to the number of buyers, prices may drop. Thus, the market approach captures the current trends and conditions of the real estate landscape influenced by competition.

The cost approach is determined more by the costs of construction and the value of the land, rather than fluctuations in buyer competition. The income approach focuses on the ability of a property to generate income, which is more about financial performance and less about market competition. Therefore, the market approach is clearly the method that best reflects the dynamic influences of competition on property values.