How many approaches do appraisers generally use to determine value?

Appraisers typically use three primary approaches to determine the value of a property: the Sales Comparison Approach, the Cost Approach, and the Income Approach. Each approach offers a different perspective on property valuation and is applicable under different circumstances.

The Sales Comparison Approach is primarily used in residential appraisals and involves comparing the property in question to similar properties that have recently sold in the area. This method is effective because it draws on current market activity, providing a realistic basis for value.

The Cost Approach focuses on determining what it would cost to replace or reproduce the property, factoring in depreciation and the land value. This approach is particularly useful for unique properties or when comparable sales are not readily available.

The Income Approach is utilized mainly for investment properties and those that generate rental income. It calculates value based on the income the property is expected to produce in the future, providing insight into its financial viability.

Using multiple approaches ensures a well-rounded appraisal, as each approach can yield a different value estimate based on its methodology and assumptions. Therefore, highlighting three distinct methods captures the comprehensive nature required for effective valuation in various contexts.