An appraisal is an objective estimate or opinion of the value of the described property, as supported by the presentation of relevant data analysis. It contains information relevant to independant property valuation, including the purpose of the appraisal, other qualifying conditions, neighborhood conditions, and data analysis.
There are three basic approaches to arrive at value:
The COST APPROACH estimates the cost of building a new property the same as the subject property, based on current prices, and subtracting depreciation and adding the land value.
The INCOME APPROACH may be used for income producing properties and is based on the theory that value is the present worth of the income stream the property is capable of producing. The net income of the property is capitalized into value by the appropriate method and rate.
The DIRECT COMPARISON APPROACH is based on the theory that an informed purchaser would pay no more for the property than the cost of onother existing property similar to the subject. The estimate of value is based on the selling price of comparable properties.