Daily Real Estate Exam Prep Question #55 - Appraisal Approaches

Daily Real Estate Exam Questions Here!!! Today our question has to do with appraisal approaches. The overall appraisal process is based on a number of factors, such as its cost, the income it generates or its fair market value as compared to similar assets. Within this process, 3 separate approaches were built. Sales Comparison Approach This approach bases its opinion of value on what similar properties in the vicinity have sold for recently. This approach is most frequently-used and is accepted to determine value in real estate appraisal process. Cost Approach This approach seeks to determine how much a property would cost to replace after subtracting depreciation. Meaning if you tore down the building specifically how much would it cost to rebuild it to its former self. Income Approach This approach determines what property generates income for it’s owner, that income, or potential for income, is used to calculate or identify the market value of the property. Appraisers will often use one of these methods or a combination of the three to determine the market value. Know them and know the different areas they're usually used in. -=-=-=-=-