What Are The Three Types Of Appraisals?

Three ways to examine the evidence

1. Sales comparison looks at completed sales of similar properties and considers differences in location, size, condition and other relevant features. The available evidence needs to suit the home and the effective date.
2. The cost approach considers the cost to replace or reproduce the improvements, subtracts depreciation and adds land value. It can offer another view for a new or unusual property, depending on the assignment and available information.
3. The income approach examines income-producing property. One common calculation relates net operating income to a capitalization rate. Rental and expense information, market evidence and the property's use help inform the analysis.

How the approaches fit together

An appraisal may use more than one approach. The report should explain the methods used and how the evidence supports the conclusion. A method is not automatically better because it produces a higher number.

For a separate discussion with a comparison table, see the earlier article on which appraisal method is best.