Appraisals of real estate are essential to the process of buying and selling. An appraisal is a fair estimate of a property’s market value. A property’s value is determined by a variety of factors, including its location, size and condition. A property appraisal is a tool that helps buyers, sellers and lenders to make informed decisions on the value of their property.

Appraisals of real estate are conducted using different methods. Each method is suitable for certain types of properties or situations. We will be discussing the different real estate appraisal methods in this blog.

Sales Comparison Approach

This is the method most often used in real estate appraisals. This approach compares the subject property against similar properties which have recently been sold in the same location. The appraiser compares and contrasts the properties that are comparable to the property being appraised. The appraiser adjusts for any differences, such as the size, location, or condition of each property. The appraiser estimates the market value of a property using the adjusted values for comparable properties.

Cost Approach

The cost method is used for estimating the value of an asset by calculating the costs of reproducing or replacing the asset. This approach is usually used when a property is new or custom built and there are no comparable sales. The cost method involves estimating both the cost of land and of building the property. The appraiser subtracts the depreciation and arrives at the estimated value of the property.

Income Approach

This approach uses the income to estimate the value for income-producing property, such as commercial or rental buildings. This approach involves analyzing and estimating income generated from the property. The appraiser will consider factors like rental rates and vacancy rates as well as expenses and market trends. The appraiser then uses the capitalization rate to estimate present value of income streams.

Automated Value Models

Automated value models (AVMs), which use computer algorithms, estimate the property value. AVMs are able to estimate the value of property using various data sources including tax records, sales statistics, and characteristics. AVMs can be used on properties with similar characteristics to those in the surrounding area. AVMs, however, can be less accurate as traditional appraisal methods.

Broker Price Opinion

A broker’s price opinion (BPO), is an estimation of the value of a real estate property made by a licensed agent or broker. BPOs can be used when a property is not sold or for loan modification. BPOs involve analyzing the characteristics of a property, its recent sales and trends in the market to determine an estimated value.


For determining the value of a home, real estate appraisals can be crucial. The type of real estate, its location and condition will determine the method for an appraisal. Real estate appraisers most often use the sales comparison approach, although other methods may be more suitable for specific situations.

Appraisals of real estate are also based on automated valuation models or broker price opinions. However, these methods are less accurate. Understanding how real estate appraisers use different methods can assist buyers, sellers and lenders in making informed decisions.