The ultimate goal of the valuation process is a well-supported conclusion reflecting the appraisals study of all influences on the market value for the subject property.  

 

 

The Market Approach: A technique of value estimation developed by comparison of recent sales of similar properties to the subject property, adjusting the comparable sales to the subject property for any significant differences for an indication of value.  The resulting adjusted sales prices should fall in a fairly narrow range of value, the best of which is an indicator of value for the subject property.  The market approach is based on the theory that a buyer will pay no more for a property than the cost of a substitute of equal usefulness. 

 

 

The Cost Approach: A technique to estimate the difference in worth to a buyer between the property being appraised and a newly constructed building with optimal utility, based on the theory that buyers will pay no more for a property than it would cost to build a reasonable substitute.  After estimating the cost to construct a reproduction of or replacement for the existing structure, all evidence of accrued depreciation is then deducted.  The resulting figure, plus the value of the land and any entrepreneurial profit, provides an indication of value, which is particularly useful for newer buildings.  The cost approach is a reliable indicator of value for buildings without significant depreciation.

 

 

The Income Approach: reflects the earning power of the property, capitalized into a value, comparing current rents and market rent for the area, deducting expenses and developing an appropriate capitalization rate to estimate value.