Commercial Appraisals - Valuation Approaches
The approaches used to establish value for Utah commercial appraisals vary by suitability
Types of Valuation Approaches:
The three most commonly accepted valuation approaches to value in a commercial value are the:
The cost approach combines the value of the land and depreciated site improvements with a depreciated value of the building.
Sales Comparison Approach
The sales comparison approach compares the property to others and adjusts for differences.
The income approach takes market rents, subtracts vacancy allowance and expenses, and then takes the resulting net income and turns that into value using a capitalization rate.
Utah appraisers are not required to provide all three approaches, and it is rare that all three approaches are actually completed. Appraisal theory has largely discredited the cost approach as reflective of market value, and commercial appraisers seldom provide it with the exception of newer construction and special purpose properties.
The sales comparison and income approaches are the primary valuation methods used for commercial properties. Even then, there are times when one of these approaches does not reflect the market, and although it might be performed, it is given little or no weight in deciding the final value conclusion.
Kranstover Appraisal Services is well versed in commercial valuation approaches.
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