What is true about the market data approach in an inactive market?

The market data approach, also known as the sales comparison approach, involves evaluating the sale prices of similar properties to estimate the value of a subject property. In an inactive market, where there are fewer comparable sales and limited data available, the reliability of this approach diminishes significantly. This is because market data relies heavily on recent transactions to determine value; without sufficient recent sales, the appraiser has less relevant information to draw from.

In an inactive market, due to the rarity of transactions, finding properties that closely resemble the subject property may prove difficult. This can lead to inaccuracies in valuation, making the market data approach less reliable compared to other methods, such as the cost approach or income approach, which do not rely as heavily on recent sales data.

Thus, it is appropriate to characterize the market data approach as less reliable or the least reliable method in an inactive market due to these limitations. This highlights the challenges appraisers face in accurately assessing property values amidst low activity levels.