How Do Appraisers Determine The Value of Residential Property?
Appraisers determine the value of residential property through a formal process that typically uses three ”common approaches to value.” The first approach is the Cost Approach which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the value of the land. The second approach is the Sales Comparison Approach which involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties it involves estimating what an investor would pay based on the income produced by the property.
