Approach, Cost Approach, Income Approach and the Automated Valuation Method. Sales Comparison: In the Sales comparison approach, there are two major processes that a home appraiser uses to create a valuation. First, there are the property’s physical attributes, including size, location, and condition, which an appraiser will evaluate during an on-site inspection. Second, the appraiser compares the property that you are buying (called the subject property) to similar, comparable properties (referred to as “comps”) that have recently sold, and makes price adjustments for differences like renovations, amount of garage space, pool, beach frontage views, and amenities that are perceived to contribute to the value. Cost Approach: The value is derived by calculating the cost to build new similar property then subtracting the depreciation and adding the land value. For residential properties this is often used for new construction. Income Approach: The value of the investment property is primarily based on its soundness for habitation and the ability to generate rental income. This method is used when the property contains at least one unit to be occupied for rent by a non-owner. Automated Valuation Method (AVM): The AVM method relies on algorithms and databases to determine a property’s value. When the appraisal is delivered, your agent should review it to make sure there the comps seem appropriate based on the local market. They need to help ensure that the value is good and that the property was appraised appropriately. The lender will also thoroughly review the appraisal report to be sure that the value
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