4.4.1. The Three Approaches to Value.For purposes of just compensation, market value must be determined “with an approach which seeks with the aid of all relevant data to find an amount representing value to any normally situated owner or purchaser of the interests taken . . . .”429 Three approaches to value are recognized in federal acquisitions: (1) the sales comparison approach, (2) the cost approach, and (3) the income capitalization approach.430

Because the “federal conception of market value . . . is intimately related to selling prices in the market,”431 the sales comparison approach is normally preferred as the best evidence of market value in federal acquisitions, but not to the exclusion of other relevant evidence of value based on market data.432 One or more approaches to value may be appropriate—even necessary—to derive a reliable estimate of market value in a given appraisal problem.433 As the Supreme Court recognized: 

Valuation is not a matter of mathematics . . . . Rather, the calculation of true market value is an applied science, even a craft. Most appraisers estimate market value by employing not one methodology but a combination. These various methods generate a range of possible market values which the appraiser uses to derive what he considers to be an accurate estimate of market value, based on careful scrutiny of all the data available.434 

Of course, not every approach to value is appropriate for every valuation assignment: in determining market value in federal acquisitions, appraisers must not use an approach that “though perhaps making it easier to reach some solution, only ma[kes] the proper solution more difficult.”435 Federal courts have repeatedly prohibited the use of an approach to value that is unreliable in light of the facts and circumstances of a given valuation problem.436 Where just compensation is concerned, a reliable valuation process is necessary to ensure a just result, “and it is the duty of the state, in the conduct of the inquest by which the compensation is ascertained, to see that it is just, not merely to the individual whose property is taken, but to the public which is to pay for it.”437