Approaches in price appraisal

When appraising any type of asset, whether on a market or non-market basis, the appraiser requires one or more valuation approaches.
     Valuations based on non-market value may apply similar approaches to valuation on the basis of market value, but include other purposes of determining estimated prices according to Market value.
     In today's valuation operations there are three basic approaches:
     - Approach to selling price
     - Cost approach
     - Approach to income

1. Approach to selling price

1.1. Basis of market value

    The price comparison approach considers the transactions of similar or alternative assets and market data, and determines the estimated value by related comparisons. Usually, appraised assets are compared with similar assets that have just been transferred on the open market. Listed and offered prices may also be considered.

1.2. Non-market value basis

    The market approach to real estate valuation is based on the non-market value shown by the fact that the property owner can pay a higher price for an adjacent property.

    In the process of applying transaction comparison methods to estimate the maximum price an owner is willing to pay for adjacent properties, the appraiser must achieve a price that may exceed market value and This estimated price is called the special buyer value.

2. Cost approach

2.1. Basis of market value

    This approach looks at the possibility that, instead of buying a certain asset in the market, one can build or build another property that is identical to the original or equally useful.
The buyer usually does not pay an asset for more than the cost of obtaining the corresponding property, unless due to time, inconvenience, and risk conditions.

2.2. Non-market value basis

    This approach focuses on individual assets and may not have a market cost.
The reduced cost replacement is an application of the cost approach used in assessing the value of specialized assets for financial reporting purposes, when market evidence is limited and not available.

3. Approach to income

3.1. Basis of market value

    This approach looks at income and expense data related to asset appraisals and estimates value through capitalization. The capitalization related to income (net income) and asset value is calculated by converting net income into an estimated value. This process is called capitalization of income, which is directly related to the income or discount rate (called the capitalization rate, which reflects the return on invested capital) or both income and discount rate. .

    Usually, the principle of substitution indicates that the income stream that generates the most return on investment corresponding to a given level of risk will result in the most likely value of the asset to be obtained.

3.2. Non-market value basis

    An investor may apply a non-market rate of return and is unique to that investor.
When applying the income capitalization approach to estimating the price an investor is willing to pay for a particular investment based on the investor's expected rate of return, the appraiser must Estimate investment value or asset value rather than market value.