Valuation and Market Analysis
Valuation estimates a property's worth using recognized appraisal methods and economic principles. Licensees use market analysis to help clients price property realistically.
The Three Approaches to Value
Appraisers use the sales comparison, cost, and income approaches. Sales comparison analyzes recent sales of similar properties and is best for homes. The cost approach estimates the cost to rebuild minus depreciation, and the income approach capitalizes a property's net income for investment property.
Principles of Value
Value is influenced by principles such as substitution, supply and demand, highest and best use, and conformity. Substitution holds that a buyer pays no more than the cost of an equally desirable substitute. Highest and best use is the legally permissible, physically possible, and most profitable use of the land.