The Process for Valuing Property.
As a part of the mortgage loan process, an appraisal is needed to get a fair market value of the home to make sure the home’s value supports the purchase price.
Two Primary Appraisal Methods:
Sales comparison approach - The appraiser compares the property with three or four similar homes that have sold in the area, which are called comparables or comps.
Cost approach - Used primarily for newly constructed properties, this approach is based on reproduction costs.