Real estate valuation inherently relies on comparable data orcomps. The three types of widely used comps are cost ofconstruction, price from sales and income from known leases.

Whether we use the cost, sales or income approach, we are alwayscomparing the subject property to other, hopefully similar,properties. This seems obvious when using the sales comparisonapproach, where we contrast our subject property to others thathave sold or are listed for sale. We can adjust the sales orlisting prices, taking into account how the comps differ, to arriveat an estimate of what our property might sell for.

The same logic applies to the cost approach. We start with theknown costs to construct similar buildings and make appropriateadjustments. For the income approach, we consider the income andexpense numbers for similar buildings and adjust them to estimatethe net operating income for our property. From this, we can derivea value.