Generally, market, income and cost methods and their mixtures are used in appraisal applications.

Peer Comparison Method (Market Method)

This approach takes into account the sale of similar properties or relevant market data, and makes an appraisal through a comparative process. A property valued in general is compared to sales of similar properties performed on the open market. The requested prices and the offers given can also be taken into account.

Income Method

In income methods, value estimation is made by analyzing the relations between the values of real estate and the expected income they will bring. In this method, it is necessary to make accurate estimates of income and expense of real estate, to choose the capitalization rate or multiplier coefficients necessary to convert income to value, and to determine the appropriate capitalization method. In other words, the basic data in this method is net income, and the return on investment and buyer's expectations are calculated accordingly.

Cost Method

The cost method takes into account the possibility that instead of buying a particular property, the person can either build another property that will provide the same or the same benefit. In the context of real estate, it is not normally advocated for people to pay more for a similar real estate, rather than building equivalent land and alternative buildings, unless there is a lack of time, various negatives and risks. Therefore, the method aims to achieve the cost of the property on the appraisal day. It is usually used in the appraisal of real estates with buildings such as hotels, factories, industrial sites, business centers or residences with large gardens.
The cost method is a method used only in built real estate. In the cost method, appraisers compare the cost of completely building the structure in question or replacing the similar one. When making this comparison, the age of the structure, the current state and the differences in the possibilities it provides are taken into account. In the cost approach, comparable data is linked to construction or development costs, and adjustments are made to take into account differences in quantity, quality and utility.

 

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