Tembo Financial February 26, 2016 No Comments

Home Appraisers use three recognized approaches to value. The first is Direct Comparison Approach, which compares the subject to similar properties that have sold. This also includes comparisons through the values of properties for sale, properties expired, and estimates a value based on the market. This is the simplest and most straight-forward approach for residential properties. Similar sales are then considered by the appraiser and then it is up to them to adjust for differences (i.e. finished basement vs. unfinished basement).

The next approach is the Cost Approach, this estimates the cost to replace or reproduce the property. From there the appraiser will apply the depreciation for physical and functional components.

The last of the recognizable approaches is the Income Approach, which estimates the potential income of the property while applying the appropriate functions, including capitalization rate and gross income multiplier.

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