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• There are three basic appraisal methods for residential properties: sales comparison approach, cost approach, and the income approach. In the first approach, the appraiser compares the property in question with a few other homes of similar specifications that were recently sold in the area. The analysis involves specific components like square feet, lot size, finished or unfinished space, age and style of the home as well as other features like fireplace and garage.
  
• The cost approach, on the other hand, is used more for determining the value of new property and based on reproduction costs. Here, the home appraisal company estimates the cost of replacing the structure if it were destroyed. The company then factors in the value of land and the depreciation for determining the real value of the property.
  
• The income approach is used to determine the property's value calculating it's rental and the gross rent multiplier (GRM).  This method is used for rental properties.
• ​Home Appraisal is not the same as Home Inspection.  While buying or selling a home you can hire and experienced inspector for pointing out potential problems that may compound in the future.  Real estate appraisers, while noting the obvious issues, won't check the chimney, the plumbing, or the air and heat. The appraiser's job is to determine how much the property is actually worth and what issues can have an effect on its value.

The appraiser collects information to make the report from several sources. The process usually begins with a thorough physical inspection of a property. The appraiser would also look at the records with the local authorities and go through recent reports of estate listing services.

The home appraisal report is likely to include the following:

• ​Explanation of how the home appraisal company determined the real value of the property.
• The condition and size of the house and its various other permanent fixtures as well as a description of the improvements that were made and the materials used for the purpose.
• A statement of any serious structural problems like cracked foundations and wet basements.
• Notes on the surrounding areas like whether it is an established neighborhood or a new development, rural acreage and similar issues.
• Evaluation of the latest market trends in the area that is likely to affect property valuation.
• Comparative market analyses that corroborates the appraisal.
• Photographs, maps and sketches.
• Reconcile the data and analyses to determine the market value
• The appraiser's job is not to make up "magic numbers."