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Chapter: What appraisal approach is most often used for residential properties? (EN)
Chapter: What Appraisal Approach Is Most Often Used for Residential Properties?
Residential property valuation is a cornerstone of the real estate market, underpinning decisions related to lending, sales, taxation, and investment. Accurate appraisal directly influences the stability of financial institutions, the efficient allocation of capital, and equitable property taxation policies. While various appraisal approaches exist, their applicability and prevalence differ significantly based on property type, market conditions, and data availability.
This chapter addresses the central question: what appraisal approach is most frequently employed in the valuation of residential properties? Scientifically, understanding this prevalence is crucial because it reveals insights into the dominant market practices, data dependencies, and the inherent biases or limitations embedded within the valuation process. Examining the prevalence of a specific approach, such as the Sales Comparison Approach (SCA), allows for the critical evaluation of its assumptions, potential for error, and suitability for diverse residential property types and market dynamics. Furthermore, it provides a benchmark against which the accuracy and efficiency of alternative approaches can be assessed. Analyzing the factors that contribute to the dominant usage of one approach over others enhances the rigor of appraisal methodologies and promotes more informed decision-making within the real estate sector.
The educational goals of this chapter are threefold: (1) to systematically define and differentiate the primary appraisal approaches applicable to residential properties (Sales Comparison, Cost, and Income Capitalization Approaches); (2) to quantitatively establish, through empirical data and industry standards analysis, the Sales Comparison Approach as the most frequently used methodology for residential valuation; and (3) to critically evaluate the strengths, weaknesses, and specific applicability criteria that contribute to the Sales Comparison Approach's dominance in the residential appraisal landscape. By achieving these objectives, this chapter aims to equip students with a comprehensive understanding of prevailing appraisal practices and the scientific rationale underlying their application in residential property valuation.
