An appraisal is an opinion of value or the act or process of estimating value. This opinion or
estimate is derived by using three common approaches, all derived from the market. They are:
- Cost Approach
to value is what it would cost to replace or reproduce the
improvements as of the date of the appraisal, less the
Physical Deterioration, the Functional Obsolescence and the
Economic Obsolescence. The remainder is added to the Land
Value.
- Comparison Approach
to value makes use of other "bench mark" properties of similar
size, quality and location that have been recently sold. A
comparison is made to the subject property.
- Income Approach
to value is of primary importance in ascertaining the value of
income producing properties and has little weight in
residential type properties. This approach provides an
objective estimate of what a prudent investor would pay based
upon the net income the property produces.
Then, after thorough analysis of all general and specific data gathered from the market, a final estimate or opinion of
value is correlated. |
