Professional Real Estate Appraisal Services in New York

This approach is based on the principle of substitution that no prudent person would pay more for a property than the cost to acquire a similar site and construct a building of equal desirability and utility, assuming no undue cost to delay. The procedure involves, first, estimating the value of the site as if vacant. Anticipated costs necessary to reconstruct all improvements are then estimated, predicated upon labor and material prices prevailing on the appraisal date. From the construction cost estimate, deductions are made for accrued depreciation caused by physical depreciation, functional obsolescence, and economic obsolescence. The depreciated cost figure is added to the estimated value of the site, indicating the value of the property by the cost approach.

The income approach is based on the principle of anticipation, that the value of a property may be measured by the present worth of anticipated future benefits accruing to the ownership and use of the property. The procedure involves estimating the gross income the property is capable of producing, then deducting vacancy/collection losses and expenses that might be incurred in the operation. The resultant net income, as estimated by the appraisers, is converted to an indication of value through various means of capitalization or discounting.

The income approach is often the most accurate methodology in the valuation of income-producing properties. If sufficient sales of tenant-occupied comparables can be located, the income approach can provide a highly accurate value indication. This approach, however, has limited application for non-income properties such as a vacant land, one- or two-family residences, special-purpose properties and small owner-occupied commercial uses.