Knowledge Focus: Appraisal Types
Appraisal Types
First, appraisal is the result or process of analysis and forming an opinion of a real estate property's estimated market value, based on a foundation of established methods and the appraiser's professional judgment. There are three core approaches used to estimate the value. These are the sales comparison approach, cost approach, and income approach. In the residential market common appraisal practices uses two of the three approaches: the sales comparison and the cost approach. With commercial appraisals, execution of all three approaches for estimating value is typical. Reasons regarding this is due to conditions surrounding a more personal and private use of residential property as compared to a more public and business use of commercial property. In fact, the primary purpose of commercial property is the generation of money; therefore, it is only reasonable to include an income approach method in the evaluation of the property's worth.
