Three approaches to value..

The three normally accepted approaches to value include the sales comparison, cost and income techniques. Although each method is important, every appraisal may not contain all three approahes.

For instance in residential practice the most widely-used is the sales comparison approach. This technique is generally applicable in the valuation of all real property and is premised on the principle of substitution; it assumes the market will pay an equal price for a substitute property with comparable characteristics.

Through use of the sales comparison approach the appraiser attempts to replicate the actions of buyers and sellers in the market place as they compare and rank properties.  How much do certain items, for example a fireplace, swimming pool, additional bath, finished basement or renovated kitchen add to the value of a home in a certain neighborhood?  Knowledge of the local market and experience allows the appraiser to select appropriate properties, analyze the sales and make adjustments for variations such as the size of a home, its' location and level of amenities. 

Another frequently used technique in the residential arena is the cost approach. When people consider buying a home they frequently think about what it would cost to build a similar dwelling.   The appraiser considers the cost to build, less any loss in value due to physical depreciation or obsolescence, and this is added to the value of the underlying land.  Terms such as accrued depreciation, functional obsolescence, economic life and effective age are associated with the cost approach.

The cost approach is most meaningful when the improvements are relatively new and they represent the highest and best use of the property. Consequently, the cost approach is not as meaningful when older homes or improvements are being appraised, and it is not always developed.

The income approach is the third method used by appraisers. However, most single family homes are owner occupied and this technique is not usually applicable.  Income producing properties generate a cash flow that can be converted into an indication of value through use of income multipliers, direct capitalization or discounted cash flow analysis.

We are appraise a wide variety of properties including single family detached homes, apartments, condominiums, offices, industrial sites and warehouses, special purpose properties... We specialize in subdivision analysis and have an extensive data base.