The Three Appraisal Approaches Tested on the Florida Real Estate Exam

Appraisal and valuation questions on the Florida exam center on three approaches to determining property value, and knowing which approach applies to which property type is most of what gets tested.

Sales comparison approach

The sales comparison approach values a property by comparing it to recently sold, similar properties (comparables, or "comps"), adjusting for differences between the subject property and each comp. This is the primary approach used for most residential properties, since active markets for similar homes generally exist. Exam questions often test the adjustment logic: if a comp has a feature the subject property lacks, you adjust the comp's price down to account for it (and vice versa for a feature the comp lacks that the subject has).

Cost approach

The cost approach estimates value by calculating the cost to rebuild the structure new, subtracting depreciation, and adding the land value separately. This approach is most useful for unique or special-purpose properties where comparable sales data is thin, like churches, schools, or newly built custom homes with no close comps.

Income approach

The income approach values a property based on the income it generates, typically by capitalizing net operating income at a market capitalization rate. This approach applies almost exclusively to income-producing properties, apartment buildings, commercial rentals, and similar assets, rather than owner-occupied residential property.

Matching the approach to the property type

The most common exam mistake here isn't miscalculating within an approach. It's applying the wrong approach to a given property type, for example reaching for the income approach on an owner-occupied single-family home, where it doesn't meaningfully apply. Before doing any math, the first move on an appraisal question is identifying which of the three approaches actually fits the property type described.

Why appraisers and agents both need this

Even though licensed appraisers, not sales associates, perform formal appraisals, the exam tests this content because every agent needs to understand how value gets determined to advise clients credibly on pricing, whether that's a listing price recommendation or evaluating whether an appraisal came in low for a reason that's actually defensible.