Appraisal Approach

DEFINITION of 'Appraisal Approach'

A procedure for determining an asset's value. The appraisal approach values assets based on a number of factors, such as its cost, the income it generates or its fair market value as compared to similar assets. A different dollar value will be assigned to an asset depending on which of these factors the appraiser primarily bases his or her estimate on. Sometimes the appraised value will not coincide with an asset's market value and buyers will often pay more or less than an asset's appraised value based on what the asset is worth to them. No matter which appraisal approach is used, an appraisal is only an educated guess as to what price the asset would fetch in a free market.

BREAKING DOWN 'Appraisal Approach'

Appraisals are used to determine the worth of high-value assets such as real estate, jewelry, businesses and vehicles. They are usually performed in conjunction with a sale or for insurance purposes. For the results to be taken seriously, an appraisal must be conducted by an individual with expert knowledge of the asset being assessed. A diamond ring should be appraised by a jeweler, and a business should be appraised by a valuation firm.

RELATED TERMS
  1. Qualified Appraiser

    An individual who has earned an appraisal designation from a ...
  2. Appraised Value

    An evaluation of a property's value based on a given point in ...
  3. Appraisal Capital

    A form of accounting adjustment. Appraisal capital is created ...
  4. Appraisal

    A valuation of property (ie. real estate, a business, an antique) ...
  5. Appraisal Fraud

    A form of mortgage fraud, whereby the value of a home is deliberately ...
  6. Appraisal Management Company - ...

    An independent entity through which mortgage lenders order residential ...
Related Articles
  1. Personal Finance

    What You Should Know About Home Appraisals

    Home appraisals are an unbiased way to determine a home's value. Here is what you need to know about obtaining one.
  2. Home & Auto

    The Home Appraisal: Your Key to a Successful Refinance

    When you refinance your mortgage, everything hinges on the appraisal. Here's what appraisers look at, how to make your home look as valuable as possible and ways to fight back if the valuation ...
  3. Home & Auto

    6 Ways Homeowners Can Dispute an Absurdly Low Appraisal

    Count it as one of the most frustrating and disappointing of all real estate quandaries.
  4. Home & Auto

    7 Ways To Increase Your Home's Appraisal Value

    When it's time to sell your home – or refinance it – it will need to be appraised. Here's how to make sure the valuation is as high as possible.
  5. Home & Auto

    The Home Appraisal: Key To A Successful Refinance

    An appraisal is a professional’s assessment of a home’s value that ensures banks don’t lend more money than a property is worth.
  6. Personal Finance

    Your Heirloom Jewelry: How Much Is It Worth?

    You grandma's diamonds are now yours. Whether you plan to keep them or not, you first need an honest appraisal. Here's how to get one.
  7. Home & Auto

    What You Should Know About Home Appraisals

    The home appraisal is a key part of any loan-closing checklist. It’s an unbiased professional opinion of a home’s value.
  8. Professionals

    Appraisals and Substantiation Requirements

    Appraisals and Substantiation Requirements
  9. Home & Auto

    Exploring Real Estate Investments: Finding Investment Value

    By Ian Woychuk, CFA Real estate returns are generated in two ways. First, the income return comes from tenants' rent payments. The income return is a straightforward calculation because all you ...
  10. Home & Auto

    How To Refinance If Your Home Appraisal Is Too Low

    When you take out a mortgage on a home or refinance an existing mortgage, most lenders want a loan-to-value ratio (LTV) of 80 percent or lower.
RELATED FAQS
  1. How is market value determined in the real estate market?

    Learn how fair market value is determined during a real estate appraisal and how market values are really decided by professional ... Read Answer >>
  2. What is the difference between economic value and market value?

    Learn about the differences between economic value and market value. Discover how they serve different purposes for businesses ... Read Answer >>
  3. What are the differences between personal and business tangible net worth?

    Understand what the term tangible net worth represents, its significance, and how the calculation of net worth differs for ... Read Answer >>
  4. What is the underwriter's job in a real estate transaction?

    Find out why the underwriter may be the most important person in your real estate transaction, and learn what information ... Read Answer >>
  5. What can cause an asset to trade above its market value?

    Learn some of the factors that can affect the price of an investment asset and the major reasons why an asset might trade ... Read Answer >>
  6. What can cause an asset to trade below its market value?

    Understand how market price can differ from actual fair value, and the reasons that an investment asset might trade below ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center