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When are the Cost Approach and Income Capitalization Approach Used?

07/01/2019 1:39 PM | Anonymous

Cost Approach

Less common but likely most appropriate as secondary evidence for adjustments for a highly-energy efficient home where comparable homes don’t exist.

Income Capitalization Approach

Commonly used with income generating properties. Though uncommon, use of this approach is appropriate in support of adjustments to the Sales Comparison Approach when energy savings are credibly documented as an income stream.

Appraisers without training in appraisal of high performance homes will likely have difficulty identifying Comparable Sales and difficulty using the Cost and Income Capitalization Approaches. They will also find it difficult to assess trends evident in a given market.

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