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Just what is an appraisal and how does it differ from a sales agent's opinion of value?  Simply, an appraisal is an opinion of value performed by an individual acting as an appraiser.  What differentiates an appraiser's opinion of value and a sales agent's opinion is objectivity and impartiality.  An appraiser forms an opinion of value that is unbiased and without accommodation of personal interest.  An appraiser observes the highest standards of professional ethics and competence in assuring the assignment results are credible and not misleading.

Appraisers provide services well beyond simply forming an opinion of value.  Please contact us and we would be happy to discuss your needs and how we may be of use.

 In performing an appraisal, there are three standard approaches; the sales comparison approach, the cost approach and the income approach.  The approach used depends on the property type, available data and the scope of work needed to provide credible results.

The sales comparison approach is a method where comparable properties, that are similar to the property being appraised (the subject property), are used as a reference point to support an opinion of value for the subject.  Differences between the comparables and the subject, that impact value,  are identified and adjusted with the result being an indication of the value of the subject property.  The accuracy of this approach lies in the selection of truly similar comparables and supported adjustments.  This approach is applicable to all property types when there is sufficient sales data available.

The cost approach is a method where the cost to rebuild the subject property is used as a reference point.  First, the appraiser estimates the value of the land as if it were vacant.  Next, the cost to rebuild or replace the improvements is estimated.  Any depreciation the improvement may have incurred is deducted from the estimated cost new.  The depreciated value of the improvement is then added to the value of the land to estimate the value of the whole property.  The accuracy of this approach is based on the availability of good data regarding land values, cost and depreciation.  The cost approach tends to lose accuracy as the improvement ages.  The cost approach is typically most applicable to new constructions, properties with significant updating and special use properties.

The income approach is a method where the future financial benefits of owning an income producing property are measured and discounted into a present value of the property.  The approach is used on properties that are purchased for income production.  The accuracy of the approach is predicated on accurate information such as rents, expenses, rates of return and investor motivation.

 



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