Explanations

For appraising a single-family residence, Comparable rent is generally considered the least important factor when determining its market value.

• Why Comparable Rent is Least Important: The income approach to value, which relies on a property’s net operating income (NOI) or gross income multipliers (GIM), is primarily used for income-producing properties such as apartment buildings or commercial properties. For a single-family residence, which is typically owner-occupied, the primary purpose is usually for personal use and enjoyment rather than generating rental income. While a single-family home could be rented, its market value as an owner-occupied dwelling is not primarily derived from its rental income potential in the same way an investment property’s value would be.

• Why Other Factors Are More Important:

    ◦ A. Location: This is often highlighted as the most important factor affecting a home’s value. An appraiser considers location as a primary characteristic driving value, as it can significantly influence a property’s price due to factors like desirability and proximity to amenities.

    ◦ B. Comparable price in the same neighborhood: The sales comparison approach (or market data approach) is the most popular and reliable method for appraising residential one-to-four-unit properties. This approach involves comparing the subject property to similar properties (comparables or “comps”) that have recently sold in the same general neighborhood. This is based on the principle of substitution, which suggests that a buyer will likely choose the more affordable option if two properties are equally desirable.

    ◦ D. Living square footage of the property: The size of the property, including its total square footage of livable space, is a key physical characteristic that appraisers analyze. It is a fundamental aspect of comparing properties in the sales comparison approach, along with the number of bedrooms, bathrooms, and overall construction quality.

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