How does an appraiser compute a homes value?
Basically, three or more homes that are similar to the subject property (these are called “comparables”) that have sold recently in the proximity to the subject are adjusted based on differences in square footage, amenities, etc. to arrive at an adjusted sales price for each comparable. Then, these are averaged, and an appraised value is determined for the subject property. This method is called the “sales comparison approach”. Additionally, the appraiser might provide an estimate of value based on the cost to rebuild the home. This is called the “cost approach”. Typically, the sales comparison approach provides the most accurate estimate of a true market value.
