Michael is hired to conduct an appraisal of a residential property. The neighbor’s property recently sold for $445,000. The neighbor’s house is of a similar age, size and condition as the owner’s house, except it has a fireplace worth $5,000 which the owner does not have. Adjusting for the difference in the improvements (the fireplace) between the owner’s and neighbor’s house would establish the value of the owner’s house at $440,000. This is an example of what appraisal approach?
Market comparison approach.
The market comparison approach is the most commonly used approach to establish the fair market value (FMV) of real estate. Applying the market comparison approach, the appraiser looks at the current selling prices of similar properties to help establish the comparable value of the property being appraised. Adjustments are made for any differences in the similar properties, such as amenities.