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Home arrow The approach to value


The approach to value
     
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     Appraisal practice depends on an established body of knowledge, a diversified viewpoint and accepted technical approaches to estimate the property value. It can use Sales Comparison Approach based on the analysis of selling, listing or offering prices of comparable properties, the cost Approach based on the depreciated cost of uildingsand improvements plus the estimate of land value and the Income Approach based on the premise that value is equivalent to the worth of the income when a property is developed to its highest and best use. The appraiser will use any or all of these approaches to value which is appropriate to reflect the reasonable market price. There are three methods of valuation and land development analysis:

 

(). Sales comparison approach:

     Sales comparison approach is a method, which based on the value of the comparable properties is through comparison, analysis, adjustment and other means to estimate the value of the subject property comparing.
The value estimated in accordance with the approach in the previous paragraph is sales comparison value.

(). Income approach

     Income approach refers to those methods such as direct capitalization method and discounted cash flow analysis. The value estimated according to this approach in the previous paragraph is income value.
     Direct capitalization method is a method to estimate the value of the subject property which apply an appropriate capitalization rate on the date of value opinion to capitalize the average objective annual net operating income in the future into an indication of value.
      Discounted cash flow analysis refers to the method that sums up the discounted net operating incomes over the future periods of analyzing cash flow and the property value at the end of the analysis periods using appropriate discounted rates to estimate the value for the subject property.

(). Cost approach

     Cost approach refers to an approach to estimating the value of the subject property, by deducting the accrued depreciation or other item due to be subtracted from the reproduction or replacement cost, based on the date of value opinion.
     The value estimated according to the approach in the previous paragraph is cost value.

(). Land development analysis

     Land development analysis is estimate the land development analysis value prior to development or construction, by deducting the direct cost, indirect cost, capital interest and profit during the development period, from total sales price of properties after completion of development or construction.
     This analysis acknowledges the changes in utility of land through development or improvement in accordance with legal use and density of the land