What is one of the three main approaches to determining value?

The Sales Comparison Approach is a key method used to assess the value of a property by comparing it to similar properties that have recently sold in the same area. This approach relies on the principle of substitution, which posits that a buyer would not pay more for a property than they would for a comparable one. By analyzing sale prices of similar properties, appraisers can establish a fair market value for the subject property. This method is particularly effective in active real estate markets where ample data is available on recent sales, making it a reliable indicator of current market conditions.

Other approaches, such as Depreciation, Investment, and Liquidation, do exist but are not considered one of the primary ways to determine value. The Depreciation Approach focuses on the loss of value over time due to wear and tear, obsolescence, or other factors. The Investment Approach examines the potential income a property could generate, focusing on its profitability rather than just its market value. The Liquidation Approach evaluates the potential price when a property is sold quickly, often under distressed circumstances, but does not provide a comprehensive measure of market value in typical transactions.