What approach is typically used when appraising a new home that has never been lived in?

The cost approach is the most appropriate method for appraising a new home that has never been lived in because it focuses on determining the value based on the cost to construct a similar property. In this approach, the appraiser calculates the current cost to build the home from the ground up, taking into account factors such as materials, labor, and associated expenses.

Since the home is new and has not been sold or occupied before, there are no comparable sales data available to effectively use the sales comparison or market approaches. The cost approach provides a reliable value in this context, as it reflects the investment necessary to create the asset, ensuring that the appraisal aligns with the actual construction costs.

In contrast, the income approach is typically utilized for investment properties where rental income is generated, making it unsuitable for a new home without a history of rental income. The sales comparison and market approaches rely on data from existing similar properties and their recent sales, which aren’t applicable in the case of a brand-new home that has yet to be introduced to the market.