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The Three Approaches
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When homeowners are ready to sell their home, they get an appraisal on the home in order to properly price it. The same benefits apply for
commercial appraisal. Before you sell any commercial real estate, always check its value to make sure you are not under pricing leaving you with the short end of the stick or worse over pricing the property causing it to sit for months with no interested buyers.
Commercial property appraisal is conducted in three methods: the cost approach, the comparison approach, and the income approach. To better understand
commercial appraisal you must understand the details of these 3 methods appraisers utilize to make their decision.
1. The Cost Approach: The necessary replacements or improvements to the property would cost. It determines the accrued depreciation of the property through economic and functional factors.
2. The Comparison Approach: The value of recent sold properties in the marketplace of like size, quality, and location.
3. The Income Approach: The market value of what the investor would pay for the property from the net income the property produces based on stabilization and residential equity buildup.
This outline describes how an appraiser creates the report but final estimation of property value considers all the criteria. The property will be thoroughly inspected to evaluate its special features, square footage, land area and neighborhood. This comparable data is taken from commercial database vendors, tax assessor records, surveys, county courthouse records, and interviews with potential buyers.
The nature of real property appraisal leads to determining the most appropriate
appraisal procedure for valuation. Although this cannot be easily determined, the subject is real property, and as such, market value can be estimated.
After examining all the value indicators, the appraiser will place emphasis on one or all of which appear to produce the most reliable and applicable solution to the specific appraisal task. They take into account the purpose of the
appraisal, the type of property, and the adequacy and relative reliability of the data processed in each of the three approaches.
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