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Commercial appraisals 101- Three methods of appraising

Owen Hughes

Estimated reading time: 3 minutes 

real estate appraisals in Niagara

When evaluating properties in the commercial sector in the Niagara real estate market, there are three primary means of appraising a property: the income capitalization approach, the sale comparison approach and the cost approach methods. Each method has value to a commercial appraiser depending on the type of property involved. 

 

Sales Comparison/Market Approach

If you are familiar with real estate, this approach may be one that you are aware of, as it is predominately used when valuating residential real estate.  The method involves selecting properties in the same market with similar characteristics for comparison. A Niagara real estate appraiser will evaluate possible decreases or increases in value through property comparisons based on deficiencies or advantages. 

 

Income Capitalization Approach

The income capitalization approach affords Niagara real estate appraisers the ability to determine the value of a property based on its income. The subject property’s income would be compared to similar properties.

 

Cost Approach

The least common approach used in commercial appraisals. In order for your commercial appraiser to use this method, they must know an in-depth knowledge of construction and material costs. The cost approach method also assumes that the value is the same as the cost to construct the property or replacement cost.

 

The cost approach, the income capitalization approach, and the sales comparison approach are integral elements of commercial real estate appraisals in Niagara. The different methods required different requisites, made independently of each other. Your Niagara real estate appraiser will examine the value indicators and consider the applicability of the three approaches in order to arrive at the final valuation. Your commercial appraiser will focus on specific methods in order to produce the most reliable results. Looking to invest in Niagara? Be prepared with What your appraiser needs from you and How to prepare your property for an appraisal

Connect with Owen Hughes, AACI Appraiser, Niagara