There are four basic ways an
appraiser can measure the value
of your property.
Site
Valuation, Income Capitalization,
Cost Approach, Sales Comparison
Site Valuation
This is the value of the land
itself. This is separate from
the value of the property. An
identical structure on 2
different properties may be
worth the same in two different
towns. In one town the land may
be worth much more, so the
overall value of the property (land+structure)
is worth more.
Income Capitalization
This is valuing a property based
on the amount of net income it
can produce. This involves
understanding how much income a
property can generate and how
much expense it costs to own it.
Since rental values can vary
greatly between different towns
and areas this method can also
give insights about the value of
a property. This is most often
important to investors, not
people who are buying a primary
residence.
Cost Approach
The value of a property is
determined by:
figuring out the cost of
replacing the structure
subtract depreciation
add the value of the land
this will net out the property
value
Sales Comparison
This is a comparison of the
value of different related
properties. Your property can be
compared to other similar
properties based on:
proximity
square footage
land size
features (pool)
number of rooms
other house features
This method compares the
property based on current market
data.
An important item to note is
that in a market where prices
are rising fast there are
properties that are in escrow
but not recorded yet and not
included in the analysis. These
properties usually reflect the
rising prices in the area.
If these higher values can be
used then the sales comparison
method can yield a higher value.
This depends on how fast the
escrows close and are recorded,
and whether you can wait for
this.
