McKissock Basic Appraisal Principles Practice Test

Appraisers estimate value using three core methods: the sales comparison (market data) approach, the cost approach, and the income approach. The sales comparison approach looks at recently sold, similar properties and adjusts for differences to infer value based on actual market transactions. The cost approach estimates value by determining how much it would cost to replace or reproduce the improvements today, then subtracting depreciation and adding the land value. The income approach converts expected income from the property into value, usually using net operating income and a capitalization rate (or discount rate), which is especially relevant for investment properties. These three methods together cover how the market behaves (sales data), what it costs to reproduce the property (cost data), and the property's income-producing potential (income data). The correct option lists these three approaches precisely: sales comparison (market data), cost, and income approaches. Other terms in the distractors refer to components or concepts within these approaches rather than distinct appraisal methods.