Real estate appraisal for rural properties is a technique used by experts in determining the current market value of properties. When a real estate appraiser values your home, it is helpful to know exactly what method or set of methods you use to determine the value of your property. The professional evaluators first study the property in question and consider these approaches in the context of the real estate in question so that they know which method to apply if necessary. Appraising rural properties is especially tricky because there is a lack of comparable properties and/or neighborhoods.

The revenue approach – Commonly used for commercial real estate, the revenue approach considers ownership as an investment that competes with a wide range of other investments to attract capital. An appraiser applies the income approach by calculating the projected net income of the property and dividing the result by a rate of return derived from the market. The final figure determines the current market value of the property. If you own a rental investment property, your residential property appraiser will probably suggest this valuation method.

Familiarizing yourself with basic appraisal techniques will help you understand how real estate appraisers have an objective value for your rural home:

The cost approach – Your real estate appraisal company will probably use this approach if your rural property is relatively new. It is based on the economic standard known as substitution, whereby potential buyers of real estate are expected to consider the cost of acquiring similar land in addition to building a building of the same size and use. This approach is refined by applying depreciation factors. Your residential property appraiser will analyze the costs of vacant lots that are known in the same market, as well as the construction cost of a similar type and size of construction.

The direct comparison approach – This approach derives the value of the property by comparing the properties in question with similar properties from appropriate comparison units, such as the value per square foot. Adjustments to unique comparable properties that are unique to the subject’s property are also applied to arrive at a weighted market value estimate. The direct comparison is applied more to the properties occupied by the owner.

The criteria of your residential property appraiser are to determine the most appropriate approach to use when calculating the value of your property. You will probably use a reconciliation of these approaches to interpreting the value of your rural property objectively.