Income capitalization approach
The economic role of
value and value estimation
Improves information flow to the market
Increases the supply of property
Improves market efficiency
Increases the demand for property
What is appraisal?
estimation of the asking price of a property
prediction of the market value of the property
professional opinion of the cost a property
supportable, defensible, estimate of the most probable selling price of
When may a formal
appraisal not be needed in a buy/sell transaction?
When the buyer is an appraiser but not the seller
a very active market with many sales of very similar properties, the
value of the possible increased accuracy may not exceed the cost of the
appraisal. (eg. lot sales in a large popular subdivision)
When the seller is an appraiser but not the buyer
Whenever the value in use of a specific site so exceeds the asking price
of the property that any delay in its purchase could be much more costly
than the value of any information disclosed by the appraisal. (eg. A
developer has assembled all but a small residential parcel in the middle
of the planned office park development.)
Which of the
following are decisions that might be assisted by an appraisal? (Check
all that apply)
How much to offer on a property?
How much should a property be sold for?
How much rent should be charged?
What time of year should construction be completed?
How much should a lender lend on a property?