What process does the appraiser use when determining value?
Once your property has been inspected to determine it’s features (i.e. # bedrooms, # baths, location, condition, quality of construction, etc…), an appraiser uses two (and sometimes three) approaches to value. These are: 1) the Cost Approach, 2) the Sales Comparison Approach and (if an income producing property) 3) the Income Approach. The Cost Approach answers the question, “How much would it cost to build this home today?”. After determining this replacement cost, the appraiser then determines how the home has aged. Since all homes age over time, an appraiser’s way of determining this aging process is called depreciation. In theory, your home is worth what it would cost to build it today minus the accrued depreciation it has experienced since it was built. The second approach is called the Sales Comparison Approach. It is the most widely accepted approach in determining value. Appraisers get to know the areas in which they work and they understand the value that certain features ad
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