the appraisal. The common methods are the Sales Comparison Approach, the Cost Approach, the Income Approach and the Automated Value Method (AVM). The valuation of the property is usually performed by a professional licensed appraiser. Sales Comparison: In the sales comparison approach the appraiser will select a minimum of three recently closed sales within a specified geography that closely resemble the subject property. They indicate adjustments where appropriate to develop a credible estimation of value. The appraiser will use several data sources to understand the market. Other factors include the location and size of the home, including the lot size; the home’s age and condition, including any upgrades or improvements made to the home; and special features of the home, like a pool. Finally, the lot itself will be considered, including its topography, landscaping, and any easements or unsightly external structures like power lines. 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 approach is often used for new construction.
Income Approach:
The Value of the investment property is primarily based on its ability to generate rental income. This method is used when the property will contain at least one unit for rental by a non-owner can using direct capitalization or gross rent multipliers to convert potential earnings into a present value.
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