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An appraiser can use one, two or all three of the following tools, whatever is appropriate:

• Sales Comparison Approach

Data is gathered about the subject property regarding, age, size, condition and features.  Data is also gathered from the neighborhood,such as the zoning, trends and uses of neighboring properties, in order to analyze the highest and best use of the subject property.  Research is made of the public records to find recent sales of properties similar to the subject.

• Cost Approach

The cost to replace the improvements as new construction is calculated based on current building costs.  Depreciation is deducted from the cost new.  The depreciation is calculated based on the effective age of the property, however, the effective age can be less than the actual age if the home is well cared for and is remodeled or updated.  Vacant land sales are researched to arrive at a value for the site, and the site value is added to the depreciated value of the improvements to arrive at a final value.  This method is most reliable, if the home is new or less than twenty years old.

• Income Approach

A survey of similar rental properties is made to arrive at a fair market rent for the subject.  Sales of rented properties are analyzed to establish a gross rent multiplier for this type of property in the neighborhood.  The gross rent multiplier is then applied to the fair market rent to arrive at a value.

 

The appraiser uses his or her knowledge and experience to reconcile these approaches and arrive at a final opinion of value.