Reso 2015-2405 - Laserfiche WebLink

Home Browse Search

ANALYSIS OF DATA 48 The Appraisal Process The appraisal process normally gives consideration to the "three approaches" as to which they are typically referred. They include the Cost Approach, the Sales Comparison Approach and the Income Approach. The Appraisal of Real Estate, 14th ed., 2013, outlines the mechanics of each approach as follows: Sales Comparison — Sales of similar, vacant parcels are analyzed, compared, and adjusted to provide a value indication for the land being appraised. Allocation — Sales of improved properties are analyzed and the prices paid are allocated between the land and the improvements. Allocation can be used in two ways: to establish a typical ratio of land value to total value, which may be applicable to the property being appraised, or to isolate the value contribution of either the land or the building from the sale for use in comparison analysis. Extraction — Land value is estimated by subtracting the estimated value of the improvements from the known sale price of the property. This procedure is frequently used when the value of the improvements is relatively low or easily estimated. Subdivision Development — The total value of undeveloped land is estimated as if the land were subdivided, developed, and sold. Development costs, incentive costs, and carrying charges are subtracted from the estimated proceeds of sale, and the net income projection is discounted over the estimated period required for market absorption of the developed sites. Land Residual Technique — The land is assumed to be improved to its highest and best use. All expenses of operation and the return attributable to the other agents of production are deducted, and the net income imputed to the land is capitalized to derive an estimate of land value. An alternative land residual technique is applied by valuing the land and improvements and deducting the cost of the improvements and any entrepreneurial profit. The remainder is the residual land value. Ground Rent Capitalization — This procedure is used when land rents and capitalization rates are readily available such as in well-developed areas. Net ground rent, the net amount paid for the right to use and occupy the land, is estimated and divided by a land capitalization rate. Either actual or estimated rents can be capitalized using rates that can be supported in the market. This procedure may be seen as an extension of sales comparison but, where applicable, it provides a specific unit of comparison. Clobus, McLemore & Duke, Inc.