Real Estate Valuation Approaches

Real estate valuation approaches organize the evidence used to estimate a property’s value. Start with Real Estate Valuation for the assignment, three-approach framework, and reconciliation process.

Use the Income Approach when market participants price expected property income. Use the Cost Approach when land value, current improvement cost, and depreciation provide meaningful evidence. Reproduction Cost addresses the narrower cost of duplicating existing improvements.

This branch sits inside Valuation Methods and Feasibility. Use the broader section when feasibility, transaction adjustments, or another property-finance concept matters more than the appraisal approach itself.

What to Check

• Property interest, value definition, intended use, effective date, and important assumptions.
• Sale verification, concessions, financing, property rights, comparable adjustments, and market conditions.
• Rent, vacancy, operating expenses, reserves, capitalization rates, discount rates, and terminal value.
• Land evidence, replacement or reproduction cost, and physical, functional, and external depreciation.
• Reconciliation with the way market participants price the subject property.

Common Mistakes

• Treating contract price, assessed value, construction cost, and appraised value as interchangeable.
• Averaging approach indications without evaluating relevance and data quality.
• Using gross rent as NOI or mixing income and cap-rate conventions.
• Assuming construction cost creates equal market value without depreciation or obsolescence analysis.

Property-income and valuation content is educational and does not provide appraisal, investment, tax, accounting, legal, or lending advice.

In this section

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