The direct answer
The sales comparison, income and cost approaches are major frameworks used in real-property valuation. The appropriate approach or combination depends on the property, assignment and quality of available evidence; no rule says all three must produce the same answer or always receive equal weight.
Sales comparison follows market transactions
This approach analyzes sales of comparable properties and adjusts or reconciles differences supported by market evidence. It is often useful where buyers and sellers rely heavily on comparable transactions.
To apply the approach to an editable scenario, use the Property Value Calculator. For the neighboring question, explore Commercial Property Valuation Calculator.
Income analysis follows economic benefits
Income approaches convert expected property income into a value indication through capitalization or discounted cash-flow methods. Reliable results require supportable income, expense, vacancy, capitalization or discount assumptions.
Cost analysis considers replacement economics
The cost approach generally considers land value plus the cost of improvements, less relevant depreciation or obsolescence. Its usefulness depends on the property and the reliability of cost and depreciation evidence.
Worked example
For a stabilized apartment property, income evidence may be highly relevant while comparable sales provide a market cross-check. For a newer special-purpose building, cost evidence may carry more weight. The final reconciliation should explain why.
Common mistakes and limitations
Do not average three approach outputs mechanically. Reconciliation should reflect the relevance and reliability of the evidence in the specific assignment.
User-entered comparable estimate only; not an appraisal, AVM or live-market valuation.
Frequently asked questions
Must every appraisal use all three approaches?
No. The applicable scope and available evidence determine which approaches are necessary and credible for the assignment.
Should the three approaches produce the same value?
No. They use different evidence and assumptions; reconciliation addresses the differences.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- IRS — Instructions for Form 709 (2025) — real property valuationComparable-sales concept and adjusting for differences in date, size, condition and location.
- IRS — Publication 551 (12/2025), Basis of AssetsFair-market-value concept and use of similar-property sales as evidence.
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