The standards of real estate appraisal in the US includes 3 major methods for appraising the value of a real estate property – sales comparison approach, cost approach, and the income approach. Of the three the sales comparison approach is most commonly used for appraisals and is also included in appraisals of investment properties where the income approach may be better suited. While a complete appraisal does take into account various other aspects of the subject property such as neighborhood conformance, condition, highest and best use, etc. the foundational value derived from the sales comparison approach plays a huge role in the final value determination.
As a result, it is important for chief appraisers at AMCs and lenders to ensure the below aspects of the sales comparison approach are accurate, consistent, and complete.
- Selection of the best comparable properties for the subject property
- Calculation of adjustments to the comparable properties
- Ensuring objectivity and eliminating bias in the comparable selection process
- Highest and best use of the comparable property is the same as of the subject
We will review each of these topics in the upcoming posts starting with the first one here. Read the complete article on Profet website.
