In proposed construction the appraiser must estimate value, based on plans and specifications provided by the client. These plans and specifications are the only source of physical data. Hand drawn plans or elaborate detailed drawings may be utilized in the value estimate, however, if all the data is not available the appraiser is forced to make assumptions. Typically, the appraiser assumes that the subject property will be constructed and finished in a manner standard for the market, however, the appraiser may overlook built-in upgrades if incomplete details are provided. With construction appraisals, the appraiser is required to return to the property once the property is complete and verify that the quality of construction and finished work is standard and consistent with the specifications originally provided.
Some lenders require further inspection on the property to assess the progress of construction.
These approaches are somewhat self explanatory and should always all be considered by the appraiser. In the residential market it is common to not fully develop the income approach due to the typical purchaser not utilizing the property to produce income and the lack of market data to support an income analysis on a predominately owner occupied market. The cost approach may not be employed in appraisals of property in excess of 50 years in age, due to the subjectivity in estimated cost new and depreciation. The sales comparison approach is typically the most reliable method of residential valuations. Finally, the appraiser correlates the applicable approaches to a single value estimate for the subject property.