Appraisal Methods
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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:
1. 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.
2. 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.
3. 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.
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