1. 6 The Appraisal Process In the appraisal process the appraiser will:
Define the problem
Determine the scope of work, considering
Identification and location of property
Property rights to be appraised
Definition of value to be estimated
Purpose and intended use of appraisal
Effective date of the opinion of value
Any special limiting conditions

2. Steps in Appraisal Process (cont.)
3. Gather, record, verify, and analyze the necessary data 4. Form opinion of value by each of the three approaches 5. Reconcile values for final opinion of value 6. Report final opinion of value

3. Beginning the Appraisal Process
Purpose and use of the appraisal
Interests to be appraised
Fee simple estate
Leasehold estate
Leased fee estate
Life estate
Date of opinion of value
Limiting conditions

4. Sales Comparison Approach
Also called market data approach
Indicated Value of Subject Property
Sales Price of Comparable Property
Adjustments =

5. Cost Approach
Assumes that new construction sets the upper limit of value
Reproduction or Replacement Cost of Improvements
Depreciation on Improvements
Site Value
Property Value ̶ + =

6. Income Capitalization Approach
Based on investment return a buyer expects
Net Operating Income Return (Capitalization Rate) =
Property Value

7. Relationship of Approaches
Sales comparison approach
Most reliable with single-family residences
Cost approach
Most reliable with non-income-producing property with limited market, or special purpose property
Income capitalization approach
Most reliable with income-producing property