An appraisal is a written assessment of market value and is used by mortgage underwriters to determine whether there is sufficient collateral to lend money to a homebuyer. Comparing recent sales of homes with similar characteristics, known as the sales comparison approach, is the most common way appraisers determine value. They also may apply the cost approach (which evaluates the value of the land and depreciated value of any improvements) and the income capitalization approach (which considers the investment value). Appraisers also consider market trends and other economic factors that may foretell whether a market is declining or appreciating.
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