Which approach to value is based on cost, sales, and income?

The correct answer is indeed the Cost Approach. This approach to value is centered on the concept that the value of a property can be determined by adding the cost to construct a replica of the property (including materials and labor) to the value of the land on which it sits, minus any depreciation. By evaluating the costs involved, this method establishes a fair estimation of a property's current market value.

The Cost Approach is particularly useful in situations where there are unique or specialized properties that do not frequently sell, making it difficult to derive value from sales data. While the other approaches mentioned—Market Analysis, Income Approach, and Comparative Approach—focus on different aspects, they do not directly incorporate the cost-based assessment that is the hallmark of the Cost Approach. For example, while the Income Approach looks primarily at the potential revenue the property can generate, and the Comparative Approach evaluates market value based on similar properties’ sales, the Cost Approach stands out as a unique valuation methodology that emphasizes the intrinsic cost of creating the property anew.