Real Estate Analysis and Commentary.

The appraiser's goal is to determine the market value of your residential or commercial property. We determine which of the approaches are applicable to your individual situation: 

(1) The Sales Comparison Approach answers the question, "What value does the buyer's market place on your property?"
(2) The Income Approach answers the question, "I am deriving income from my property, how would a potential buyer value this property?" , and
(3) The Cost Approach which answers the question, "If my property is new, how does the buyer value my property and land MINUS the depreciation?"

Regardless of the age of a property, using the principle of substitution, nobody would ever buy a property for more money than it would cost them to buy the land and build it themselves. That being said, the Sales Comparison and Cost Approach are always taken hand-in-hand with strong consideration of this principle. Applied to a car purchase, would you pay more for a used car than a new car. What is the difference in value? That is called market-recognized depreciation. We apply the same type of depreciation, quantified, to building(s) on a property.

So, with all of that in mind, we have several value hypotheses, a phrase we borrow from our junior high school days - One is the null, or who knows?, the second is what value does a homeowner or business owner think is reasonable , the third is what value does the assessor think is reasonable and the fourth-fifth and sixth is what does the Sales, Income and Cost Markets think it is worth. Is it easy--No!!  These approaches designed in the 1930s are there to protect your value and your lender's risk, btw. 

Our thinking- it's your money and our job is to help you recognize and hopefully, maximize your property investment.

Posted by Barry Colen on September 29th, 2017 5:12 AMLeave a Comment

Subscribe to this blog


My Favorite Blogs:

Sites That Link to This Blog: