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Appraisal Methods


Title: Appraisal Methods

Author: Ron Vignari

Appraisal Methods Most appraisers use three approaches to
establish the value of a property. The Sales Comparison Approach
is normally considered to be the best indication of value for
residential property.

Sales Comparison Approach: In this approach the appraiser finds
three to four comparable properties in the neighborhood which
have recently sold. Ideally, these properties are within a
one-half mile radius of the subject property and have sold
within the last six months. The appraiser compares the sold
properties to the subject property. The factors used in the
comparison include square footage, number of bedrooms and
bathrooms, property age, lot size, view, and property condition.

Cost approach: This approach considers the value of the land,
assumed vacant, added to the cost to reconstruct the appraised
building as new on the date of value, less the accrued
depreciation the building suffers in comparison with a new

Income capitalization approach: In this approach the potential
net income of the property is capitalized to arrive at a
property value. This approach is suited to income-producing
properties and is usually used in conjunction with other
valuation methods. The process of converting a future income
stream into a present value is known as capitalization.

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