What are the three main approaches to value used in property appraisals?

The correct answer identifies the three main approaches to value used in property appraisals: the cost approach, sales comparison approach, and income approach.

The cost approach focuses on determining the value of a property by estimating the cost to replace or reproduce the improvements, minus any depreciation. This is particularly useful for valuing new constructions or properties where there aren’t many comparable sales.

The sales comparison approach, also known as the market approach, involves comparing the property in question with similar properties that have recently sold. This method relies on actual market data and is often favored in residential appraisals where there are sufficient comparables.

The income approach is primarily used for investment properties and involves evaluating the potential income that the property could generate. This method calculates value based on the net operating income and the capitalization rate, providing an estimate that reflects the property's earning potential.

Understanding these three approaches is essential for appraisers, as they may apply different methodologies depending on the type of property being appraised and the circumstances surrounding it. Each approach provides unique insights into the value and assists in forming a well-rounded assessment.