In the United States, there are three general approaches to appraising residences.
The cost approach considers the cost of building either a reproduction or replacement of the same home. Cost is a more reliable assessment for newer homes than older ones.
The sales comparison approach compares the features and attributes of a home with comparable (size, location, quality, age, etc.) ones. This is the most common method of appraisal for residences, and the most difficult for assessing a green home.
The income capitalization approach considers a property’s income-generating potential and arrives at a value based on that potential. This approach is common for rental residences.
In the end, any appraisal is an “opinion of value.” Opinion is closer to the art end than the science end of the spectrum. Yet an appraisal seeks to quantify in dollars, which is closer to the “science” of economics. A good appraiser gathers the most and best information possible and then issues an opinion—an opinion that can make or break your dream.
Most appraisers don’t like to be accused of being subjective, so they tend to rely on “data” that they can reasonably evaluate to come up with a value for a house. The problem is that while metrics like square footage, sale value, and the number of bedrooms and bathrooms are commonly accepted, metrics such as air changes per hour; floor, wall, and ceiling R-values; and window U-values and the like are not—yet.
