Appraisal Approaches

In times when the real estate markets are experiencing fluctuations in pricing, it’s critical that appraisals capture and reflect the current market. Appraisers typically employ one or more of the common approaches to value: the cost approach, the sales comparison (or market) approach, and the income approach.

  • Cost Approach: provides a value indication that is the sum of the estimated land value, plus the depreciated cost of the building and other improvements
  • Sales Comparison (Market) Approach: compares one property to comparables or other recently sold properties in the area with similar characteristics
  • Income Approach: uses the income the property generates to estimate fair value. It’s calculated by dividing the net operating income by the capitalization rate.

All of these require knowledge and understanding of the most current market pricing. This can vary from current building costs to standing timber values, or simply the market transaction pricing for vacant land. Using recent comparable sales is essential to an appraisal that reflects the current market. Or, if no relevant recent sales are available, the appraiser must be able to make the appropriate time adjustments to older comparable sales.

The Steigerwaldt appraisal team, along with our brokerage team and our forest and market analysts’ assistance, pride ourselves on staying fully informed on today’s markets and generating appraisals that reflect a supportable and accurate current property appraisal.

-Tom Hittle, Senior Vice President: Project Coordination/Client Services