Appraisers are taught to estimate value by following three recognized approaches to value.

Sales Comparison Approach

Compares similar, recently sold properties (homes, farms, machinery, jewelry) to the property.

Income Approach

Estimates what a prudent investor would pay for the property base on the income the property produces.

Cost Approach

Estimates the cost to replace or reproduce the property being appraised.

Through consideration of results of the analysis conducted, an appraiser then develops a final estimate or opinion of value.