In applying valuation approaches, which two types are common for residential properties?

In the context of mass appraising for residential properties, the two most commonly applied valuation approaches are the Cost approach and the Sales comparison approach.

The Cost approach involves estimating the value of a property based on the cost to replace or reproduce it, subtracting any depreciation. This method is particularly useful for new constructions or unique properties where comparable sales data may be limited. It helps in determining how much it would cost to develop a similar property, providing a foundational perspective on value.

The Sales comparison approach, on the other hand, relies on recent sales data of comparable properties to derive a value for the subject property. This approach is heavily utilized in residential real estate as it reflects the market's willingness to pay based on actual transactions, allowing appraisers to adjust for differences between properties. This method is favored for its ability to incorporate current market conditions and buyer behavior effectively.

Both approaches provide critical insights that help establish a balanced and credible value for residential properties, making them essential tools in the appraiser’s repertoire. While the Income approach (often associated with commercial properties) and techniques like the Gross Rent Multiplier (GRM) are also valuable in specific contexts, they are less commonly applied in residential property appraisals compared to the Cost and Sales approaches.