Which valuation approach on the Uniform Residential Appraisal Report is required for residential properties by Fannie Mae and Freddie Mac?

The sales comparison approach is the required valuation method for residential properties on the Uniform Residential Appraisal Report as mandated by Fannie Mae and Freddie Mac. This approach is particularly relevant for residential real estate because it relies on comparing the subject property to similar properties that have recently sold in the same market. This method effectively reflects the current market conditions and buyer preferences, making it essential for accurate and reliable appraisals in the residential sector.

The sales comparison approach evaluates properties that are alike in key characteristics, such as location, size, age, and condition. By analyzing the sale prices of these comparable properties, appraisers can derive a value for the subject property that is consistent with the market. This method is most recognized and accepted in residential appraisals due to its direct connection to actual sales data, which provides a sound basis for determining a property's worth.

Other methods, such as the cost approach or the income approach, might be applicable in specific contexts, but they are not the standard for residential properties under the guidelines set by Fannie Mae and Freddie Mac. The cost approach estimates value based on the cost to replace or reproduce the property, and the income approach is typically used for investment properties generating rental income. Neither of these methods captures the nuances of the residential