Legal Definitions - appraisal trinity

The appraisal trinity refers to the three most commonly used methods for appraising real property. These methods are:

• Market Approach: This method involves comparing the property being appraised to similar properties that have recently sold in the same area. The appraiser will take into account factors such as location, size, and condition to determine the value of the property.
• Cost Approach: This method involves determining the cost of rebuilding the property from scratch, taking into account factors such as materials, labor, and depreciation. The appraiser will then adjust this value based on the age and condition of the property.
• Income Approach: This method is used primarily for commercial properties and involves estimating the income that the property is capable of generating. The appraiser will take into account factors such as rental rates, vacancy rates, and operating expenses to determine the value of the property.

For example, if an appraiser is valuing a residential property using the market approach, they will look at recent sales of similar homes in the same neighborhood to determine the value of the property. If they are using the cost approach, they will estimate the cost of rebuilding the home from scratch and adjust this value based on the age and condition of the property. If they are using the income approach, they will estimate the rental income that the property is capable of generating and use this to determine the value of the property.