An appraisal is a determination of value or the act or process of estimating
value. This determination or estimate is derived from one or more of three methods, based on 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, minus the
Physical Deterioration, the Functional Obsolescence and the Economic Obsolescence. The remainder is added to the Land
Value.
- Comparison Approach
to value uses other properties of similar size, quality and location that have been
recently sold. A comparison is made to the subject property with appropriate adjustments for variances from the
comparable properties used in the analysis.
- Income Approach
to value is of primary importance in establishing the value of investment (income producing) properties and has little weight in
owner-occupied properties. This approach provides an objective estimate of what an investor would pay based
upon the net income derived from the property.
Then, after thorough analysis of all relevant data, a value is assigned.