Thre Methods of Property Valuation

Appraisers use three different approaches to establishing the value of any real property and its improvements, if they exist. They are:

Comparable sales. Look for similar properties nearby that have sold recently. “Nearby” and “recently” are defined often by the situation. This approach is used primarily in home resales.

Income. This is used for commercial income-producing properties and is the Net Operating Income divided by the capitalization rate (Cap Rate) for this asset class in this area. The cap rate is the variable here. 

Cost. For new or very recent construction this is the most reliable approach. Appraisers have a way of including the builder’s profit in their opinion. It’s a bit complex but fascinating. 

If you want to go deeper on this topic, click here to read a thorough explanation courtesy of the Pickens County South Carolina Tax Assessor. 

Leave a Reply