What are the three appraisal approaches to value?

The three appraisal approaches to value that are widely recognized in real estate are the sales comparison approach, cost approach, and income approach.

The sales comparison approach evaluates a property's value by comparing it to similar properties (comps) that have recently sold in the same area, adjusting for differences in features, size, and condition. This approach is particularly effective for residential properties where enough comparable sales data is available.

The cost approach estimates value by determining what it would cost to replace or reproduce the property, factoring in depreciation and land value. This method is often used for new constructions or unique properties where comparable sales may not be readily available.

The income approach is utilized primarily for investment properties and commercial real estate, assessing how much income a property generates. This method reflects the potential revenue an investor could expect from leasing the property, providing a valuation based on projected cash flow.

This option captures the industry terminology and reflects the commonly accepted methods for determining property value, making it the correct choice.