(4) Types Of Appraisals

Question 1

4 steps:

• estimate the value of land
• estimate of the current cost of reproducing or replacing the building
• accrued depreciation from physical, functional obsolescence, and external obsolescence
• estimate accrued depreciation from construction cost
• add estimated land value

Answer 1

Cost Approach

Question 2

“Principle of Substitution”, that the price of the property cannot exceed the cost necessary to acquire a similar substitute property of equal desirability that is readily open on the marke

Answer 2

Direct Sales Comparison (Market)

Question 3

Calculates the present value of a property from its expected future net income. Usually used for apartment complexes, office buildings, or properties occupied by commercial tenants

Answer 3

Capitalization (Income Approach)

Question 4

Informal substitute for the capitalization approach, when a property has a feature where it will rise the value of the property.
(Sale price/gross annual income=gross income multiplier)
(Annual income x gross income multiplier =value)

Answer 4

Gross Income Multiplier (GIM)