Laserfiche WebLink
THE APPRAISAL PROCESS <br /> INTRODUCTION <br /> The appraisal process begins by identification, description, and analysis of all aspects of the <br /> subject property. The fixity (location), physical characteristics, and income characteristics are <br /> compared to competing properties in the marketplace. <br /> The marketplace demand on the subject property is the sole value determinator. The appraisal <br /> estimates the value for the subject improvements by analyzing the property as if it were being <br /> actively marketed as of the effective date of the appraisal. <br /> Market demands and influences are measured by three commonly used approaches to value. <br /> These approaches are based on the market interpretations of value. The three approaches to value <br /> are: <br /> 1. The Cost Approach <br /> 2. The Market Approach <br /> 3. The Income Approach <br /> THE COST APPROACH <br /> The Cost Approach is an approach to value which estimates the current replacement or <br /> reproduction cost of the improvements (math structures and site improvements). Depreciation is <br /> then subtracted from the base cost. There are three sources of depreciation: physical depreciation <br /> (deterioration), functional depreciation, and external (economic) depreciation. The cost of the <br /> land vacant (as obtained from market data), combined with the estimated replacement or <br /> reproduction cost minus depreciation provides an indication of value for the subject. Considering <br /> the subject is vacant land, this approach to value is not applicable. <br /> THE MARKET APPROACH <br /> The Market Approach compares the subject property with other similar properties that have <br /> recently sold or are currently listed for sale. In order to fmd an indication of value for the <br /> subject, positive and negative adjustments are made to the comparables for the differences which <br /> exist between the comparables and subject. <br /> THE INCOME APPROACH <br /> The Income Approach is based on an estimate of the subject's net income. The income is then <br /> capitalized at a rate commensurate with the risk and life expectancy of the improvements, to arriv e <br /> at an indication of value from a typical investor's standpoint. The Income Approach measures <br /> the present value of an income stream, which then indicates a value for the subject. This approac h <br /> 13 <br />