How does the appraiser actually estimate value?
After the site visit is completed, the valuation process begins back at the office using standard professional appraisal techniques. There are three recognized methods of valuation: the Cost Approach, the Income Approach, and the Market Approach (also referred to as the Direct Comparison Approach). The Cost Approach is based on the assumption that a typical purchaser will pay no more for the property than the cost of building it new less depreciation. The Cost Approach starts with a square foot cost based on the Marshall & Swift Cost Manual or our general cost experience. Physical depreciation due to aging and wear and tear on the property is deducted. Functional or external obsolescence is deducted based on any problems noted which would cause an additional loss of value, such as poor floor plan or location. The land is valued as if vacant and ready to be put to its highest and best use or its contributory value to the property. The depreciated value of the site improvements is also a
