What
Is An Appraisal ?
An appraisal is an opinion of value or the act
or process of estimating value. This opinion is derived by
using one, two or all three common approaches. These approaches
are the comparison approach, cost approach and income approach.
- Comparison Approach to value uses comparable
properties of similar size, quality and location that have recently
sold – usually within the last 6 to 9 months. A comparison
is made to the subject property and monetary adjustments are made
to reflect differences in the properties, such as square footage,
acreage and amenities (fireplace, in ground pool, modern kitchen,
etc.) The comparison approach is by far the most relied upon
approach.
- 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 depreciation,
functional obsolescence and/or economic obsolescence plus the land
value. Generally land should be less than 30% of the total
cost to replace, but in our area the land to value ratio generally
exceeds 30% due to the lack of vacant land available for sale.
- Income Approach
to value is of primary importance in ascertaining the value of income
producing properties. This approach provides an objective estimate
of what a prudent investor would pay based upon the net income the
property produces.
WHY
SHOULD YOU HAVE AN APPRAISAL?
To
obtain an opinion of value for...
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