While the limitations of the cost technique are apparent, frequently it is the only available approach to value. Hence the limitations must be reviewed relative to alternative appraisal approaches. If sales data are deficient and property may not be appraised under the income approach, the cost technique provides the most accurate method of valuation. Certain […]

In estimating land value under the cost approach, comparable land sales serve as the best evidence of market value. To value the land occupied by a church, an effort would he made to secure data on the sales of vacant land similar in most respects to the site occupied by the church building. Since the […]

For valuation purposes, depreciation is de-fined as a loss in value from any cause. Appraisers estimate depreciation in terms of physical depreciation and functional and economic obsolescence. In this sense, depreciation represents the difference in value between the building under appraisal and a new, substitute building. Depreciation, in the sense used here, refers only to […]

The degree of accuracy determines the technique of estimating cost. If the appraisal calls for accuracy comparable to that of a contractor preparing a construction bid, the quantity survey method would be used. If less accuracy is allowable, and if the required estimating skills and data are at hand, unit-in-place estimates substitute for quality survey […]

Also referred to as the summation approach, the cost approach requires (1) an estimate of the building cost of construction, (2) the building depreciation, and (3) the land value. These steps are illustrated in the following table. The estimated market value is a summation of the land value and the depreciated building value. The method […]

A list of 56 sales of apartment houses showing gross income multipliers arranged by intervals of 1.0. Note that the two intervals 5.00 to 5.99 and 6.00 to 6.99 have the greatest number of cases among the intervals. The median gross income multiplier is 6.04. The variation in gross income is accounted for by differences […]

There is some practical limit to the number of adjustments that may be made. A practical limit would be six characteristics that are subject to sales adjustments. As the number of adjustments increases, the sale gradually loses the required degree of comparability. To cite an extreme example, you would not use the sale of a […]

The importance of the data source is suggested by the detail required for each comparable sale. Usually it is unlikely that all this in-formation will be secured from a single source. For example, the appraiser may identify a prospective comparable sale from the local property tax records. Typically additional sales information must be obtained by […]

Appraisers may compensate for some of the deficiencies of sales data on the basis of their general familiarity with real estate values. Provided that real estate sales meet minimum standards of acceptance, they offer a fairly objective means of estimating value. In fact, the advantages of the market comparison approach frequently more than compensate for […]

While on its face this approach seems quite objective, imperfections of the real estate market call for a number of subjective interpretations. Though personal judgments may be minimized, this approach has limitations that may require dependence on the income or cost approach to value. Time of Sale. In selecting sales, a compromise must be made […]