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For more than 15 years, Tyler Lowman has worked in the San Diego real estate sector. One of the areas in which Tyler Lowman has particular experience is valuation analysis, a process in which an appraiser determines the fair market value of a home or other piece of real estate.
Real estate appraisers use three different criteria in determining the value of a property: market data, income, cost. These three factors taken together will generally provide a real estate appraiser with a sense of the property’s worth, though different professionals may have different opinions on the value of a property.
Market data sets a range of values. During this state of valuation, an appraiser compares the property to other similar ones recently sold or currently on sale. Some factors, such as unique improvements or financing terms, can somewhat shift the value.
Cost, meanwhile, indicates the replacement value of any buildings or improvements on the property. How much would a buyer have to pay to purchase an empty lot in the same area and construct a comparable property?
Finally, income capitalization is primarily used for business properties and focuses on the long-term income the property can generate.
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