|
Appraisal Methods
Most appraisers use three approaches to
establish the value of a property. The Sales Comparison Approach
is normally considered to be the best indication of value for
residential property.
-
Sales Comparison Approach: In this approach
the appraiser finds three to four comparable properties in the
neighborhood which have recently sold. Ideally, these
properties are within a one-half mile radius of the subject
property and have sold within the last six months. The
appraiser compares the sold properties to the subject
property. The factors used in the comparison include square
footage, number of bedrooms and bathrooms, property age, lot
size, view, and property condition.
-
Cost approach: This approach considers the
value of the land, assumed vacant, added to the cost to
reconstruct the appraised building as new on the date of
value, less the accrued depreciation the building suffers in
comparison with a new building.
-
Income capitalization approach: In this
approach the potential net income of the property is
capitalized to arrive at a property value. This approach is
suited to income-producing properties and is usually used in
conjunction with other valuation methods. The process of
converting a future income stream into a present value is
known as capitalization.
|
