Name the three main approaches to property valuation.

The three main approaches to property valuation are aptly identified as the Sales Comparison Approach, Cost Approach, and Income Approach. The Sales Comparison Approach involves comparing the subject property to similar properties that have recently sold in the same area, making adjustments for differences to arrive at a fair market value. This approach is especially effective in residential real estate, where comparable sales data is abundant.

The Cost Approach is based on the idea that the value of a property is equal to the cost to replace or reproduce it, less any depreciation. This method is useful for new construction or unique properties where comparable sales may not be readily available because it focuses on the value of the land plus the current cost of building improvements.

The Income Approach is primarily used for income-producing properties, focusing on the potential revenue that the property can generate. It considers future cash flows, typically through methods such as capitalization rates or discounted cash flow analysis, to estimate the present value of the investment.

Other options present variations that do not accurately represent the established methods used in property valuation, which can lead to confusion among students. Recognizing the widely accepted three approaches is essential for anyone studying real estate fundamentals, as these methods provide the foundation for evaluating property worth effectively.