800-595-1939/210-822-8757

              800-442-8211/210-822-4780 Fax

COST APPROACH TO VALUE

The cost approach is made up of two elements, the land value, and the value of the improvements to the land minus their depreciation. The principal of substitution is inherent in the development of the cost approach. This principal affirms that no prudent purchaser will pay more for the real estate, than it would cost to purchase the land and build the improvement new. The land value is estimated based on the most recent, most proximate, and most similar sales of vacant land in the area. The building improvements are estimated based on published construction cost manuals, and the appraisers own survey of local builders. The cost approach is most reliable in areas that have an abundance of land sales and on houses that are relatively young in age.

 INCOME APPROACH TO VALUE

The income approach to value is generally used for valuing investment properties, and in most cases is the least reliable value indicator for single family residential housing. The income approach to value reflects the present value of an anticipated income stream (rental income), plus the anticipated value of the real estate at the end of the investment period.

SALES COMPARISON APPROACH

The Sales Comparison  Approach to value is generally the most reliable indicator of value for residential properties. The principal of substitution is also inherent in the development of the market data approach. This principal affirms that a prudent purchaser will not pay more for one property than it would cost to purchase another of like kind. Generally the appraiser relies heavily on this approach. The value by Sales Comparison  Approach is developed by using "comparable sales". Comparable sales are the most recent, most similar, and most proximate sales, that relate to the property being appraised. The appraiser makes "adjustments" to the comparable sales for differences. If a comparable has an amenity that the property being appraised does not have, a (-) minus adjustment is made. If the comparable lacks an amenity a (+) plus adjustment is made.

After making the appropriate adjustments to the comparable sales, the comparable sales will indicate a narrow range of value. A reconciliation of the adjusted sales is made by the appraiser, giving primary emphasis to one or more sales, generally based on the amount of the gross and net adjustments made.