To contact us:    860-589-3355    /    P.0. Box 796, Bristol, CT06011-0796            aldieri@aldieri.com

Three approaches to value
There are three standard methods of estimating the market value of real estate, and each plays a role in real property appraisal.

The most widely-used and accepted method  is the sales comparison approach.  This approach bases its opinion of value on what similar properties in the vicinity have sold for recently, with appropriate adjustments for time, land site, living area, condition, quality, amenities etc.  It is these adjustments where the expertise of the professional appraiser becomes necessary.  As of yet, no computer can accurate quantify appropriate adjustments without significant human input.

Another approach is the cost approach.  How much would a property cost to replace, that is, rebuild, minus "accrued depreciation," that is, depreciation that has occurred since the property actually was built?  The cost approach includes concepts like "economic life" and "effective age" that are mostly of use in determining the value of special use properties, special purpose properties or properties where subsequent structural improvements greatly impact value.

The third approach is the income approach.  Some properties generate income for their owners -- the most obvious examples being rental properties such as apartment buildings, multi-tenant office and retail buildings etc.  The anticipated income which a property will generate greatly impacts the price an investor will pay.  The appraisal correlates anticipated NOI with value. 

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