The purpose of this appraisal is to estimate the market value of the subject property. The information that was gathered is utilized to estimate the value of the site and in each of the three applicable approaches to value (sales comparison, income and cost) that are used to estimate the value of the whole property. Each approach represents an alternative course of action that a typical purchaser takes to determine the price they will pay for a property. Sheridan, Gillette and Cody are constantly evolving having a knowlegable appraiser is key to your success!
In the cost approach an estimate is made of the cost of reproducing the subject improvements at today’s cost. From this reproduction cost is deducted the estimated loss in value caused by diminished utility from physical deterioration, functional obsolescence and external obsolescence.
The sales comparison approach utilizes the sales and offering of similar property to arrive at an indication of the subject property’s value. Each comparable sale and offering is adjusted for difference in time of sale, location, physical characteristics, financing and special conditions to give an indication of the value of the property being appraised.
In the income approach to value an estimate is made of the market gross potential income which the property being appraised would generate. This estimate is normally based on the rentals of competitive properties in the same market; or rentals of the subject property as appropriate. From the gross potential rent is deducted an allowance for vacancy, collection costs, fixed expenses, variable expenses are deducted to produce the net operating income of the property. The final step of the income approach is to capitalize the net operating income into an indication of the value of the property.
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