What Are the Primary Methods Used by Professional Appraisers in Appraising the Value of Commercial Real Estate?
There are three principal methods used for appraising real estate: Sales Comparison Approach. Using this approach, the appraiser reviews the price paid recently for similar properties, but makes adjustments for positive and negative variances between properties. This approach does not work well when there is only a small number of comparable sales to review. Cost Approach. Using this approach, the appraiser determines a land value and then separately values the improvements by evaluating the current cost of reproducing the improvements. Further adjustments are then made to reflect depreciation in value associated with age, “wear and tear”, and other factors that may have contributed to making the improvements more obsolete. This method is useful when the sales comparison approach cannot be effectively applied because the property is unique and there are very few comparable sales. Income Approach. Using this approach, the appraiser generates a value by analyzing the income associated wi
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