Question: How Is The Fair Market Value Of My Home Determined?
Answer: Fair Market Value of a home can be determined with three different methods: Sales Comparison Approach, Cost Approach, and Income Approach. The Sales Comparison Approach uses similar sales or listings nearby to determine what the market is selling and buying for. Adjustments are made to the whenever differences are found such as square footage, updates, etc. These adjustments rely on the comparable data the appraisers research as well as their knowledge of the market area. The Cost Approach is developed by estimating how much it would cost to rebuild and replace the current structure with a structure made in a similar manner. This approach is most commonly used for new construction. The Income Approach is used for properties that generate income such as multi-unit properties and rental properties. This approach uses the income data to calculate an estimate of the opinion of value. One of these, or a combination of these approaches, may be used by the appraiser to determine his or her final opinion of value.
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