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.
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
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