Hello.
There are three basic methods used in valuation of real property.
(1) Cost method
(2) Sales comparison method (also known as "comparative market"
method).
(3) Income method
sources:
"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.
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 subject property.
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.
source: mortgate101.com
http://nt.mortgage101.com/partner-scripts/1086.asp?p=fammtgga
"There are 3 major types of appraisal methods:
Market Data Approach (also called Sales Comparison Approach)
Income Approach (also called Capitalization Approach)
Cost Approach"
source: ABC Real Estate School Appraisal method
http://www.abcrealestateschool.com/online_appraisal_assignment.shtml
"A property's value can be determined in three different ways:
Property is compared to others similar to it that have sold recently,
using only sales where buyer and seller both acted without undue
pressure. This method is called the market approach and is normally
used to value residential, vacant, and farm properties.
The second way is to calculate what it would cost, using today's labor
and material prices, to replace the structure with a similar one. If
the structure is not new, the assessor determines how much is has
depreciated since it was built. The resulting value is added to an
estimate of the market value of the land. This method is used to
value special purpose and utility properties, and is called the cost
approach.
The third way is to analyze how much income a property, like an
apartment building, a store, or a factory will produce if rented.
Operating expenses, insurance, maintenance costs, financing terms, and
how much money owners expect to make on this type of property, are
considered. This is the income approach."
source: Jessamine County Property Valuation
http://www.jessaminepva.com/general_appraisals.html
Use the following links for more detailed explanations of the three
methods:
FHALibrary.com: Cost Approach
http://www.fhalibrary.com/fha_appraisals/fha_appraisal_process/cost_approach.asp
FHALibrary.com: Sales comparison method
http://www.fhalibrary.com/fha_appraisals/fha_appraisal_process/sales_comparison.asp
FHALibrary.com: Income method
http://www.fhalibrary.com/fha_appraisals/fha_appraisal_process/income_approach.asp
search strategy:
property appraisal methods
property valuation approach
I hope this helps. |
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