What methods do appraisers use to estimate value?
Appraisers use many methods to derive value. These can be classified into 3 main groups. Cost Approach: This method is based on the idea that the value of a property is equal to the value of the land plus the cost of all the additions less depreciation from all causes. Generally people will not pay more for a property than it would otherwise cost to buy a similar site and build a similar addition upon it. Therefore, under stable market conditions, this approach tends to set an upper limit to value. In summary: + cost new – accumulated depreciation + land value = value by cost approach Market Approach: This method is based on the idea that value can be derived from comparing the subject property to recently sold similar properties with allowances for differences. Comparables inferior to the subject property (i.e. those not as good as or offering fewer or lower quality amenities and features than the subject) likely suggest the bottom value range for the subject property and comparabl
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