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How
is the value estimated?
There are
three basic approaches to value:
The
Direct Comparison Approach, is based on the
theory that an informed purchaser would pay no more for
a property than the cost of acquiring another existing
and equivalent property. The value estimated is based on
the selling price and listing of comparable properties.
The
Cost Approach estimates the cost of building
a new building identical to the subject being appraised,
at current prices, subtracting accumulated depreciation
and adding the estimated land value.
The
Income Approach relates to income producing
property and is based on the theory that value is the
present worth of the income stream which the property is
capable of producing when developed to its highest and
best use. The net operating income is capitalized in a
value by an appropriate method and rate.
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