C150233 Appraisal - Laserfiche WebLink

Home Browse Search

The Appraisal Process: The appraisal process is an orderly procedure of gathering information from the market which will lead to an estimate of value. This information is obtained from many sources. but the best source is through recent sales of similar type property. All sales used are examined and confirmed by either the buyer. seller or a party knowledgeable of the transaction. All pertment facts from the sales are analyzed. classified and interpreted for use in tbe valuation process. There are three approaches to value which could be considered when arriving at an opinion of value for the real estate. I. The Cost Approach 2. The Market Data (Sales Comparison) Approach 3. The Income Approach In the Cost Approach. the value of the various classes ofland is estimated from the market data. The replacement cost new of the buildings is estimated. accrued depreciation (physical. functional and external) is estimated and subtracted from the replacement cost new estimate. for an indication of the contributing value of the buildings. The cstimated value of land. added to the ctmtributory value of the buildings results in an opinion of value using the Cost Appmuch. rhe Market Data Approach is the most viable when an adcquate numbcr of properties of SImilar type have been sold. The application ofthi. approach produces a value indicationl<lT a property through comparison with like properties. called comparable sales. The sales prices of properties judged to be most comparable tend to set a range within which the value indication for the subject property falls. The comparison results in specific dollar adjustments to the sale price of the comparable property. Positive adjustments are made for deficiencics in the sale property relative to thc subject and negative adjustments arc made for superior characteristics of the sale relative to the subject. Tbrough this procedure. tbe appraiser derives a logical estimate of the probable price for which the subject property could be sold on the effective date of the appraisal. In the income approach. the appraiser measures the present value of the future bcnefits of property ownership. and like the cost and market approaches. requires extensive market research. The appraiser investigates areas such as the propcrty.s gross income cxpcctancy~ the expected luss in gross income from lack of full use. thc expected operating expense. the pattern and duration of the income stream. and the anticipated resale value. When accurate income and - - - - - - - - l' -0 - - expense estimates are established. the net income is converted into present value by the process of direct capitalization. The rates or factors used for direct capitalization are derived by investigation into acceptable rates of return for similar properties. Due to the fact that income generation from ranch properties is typically very low in relation to the selling price and as a result the calculated direct capitalization rates are very small. Consequently when dealing with a very small direct capitalization rate. any small variation in the rate can result in a large variation in value. As a result the income approach is less reliable as an indicator of value. lt also should be emphasized that in today's market the typical buyer is less concerned about the agricultural production and more concerned about the intrinsic value of the property. causing even less reliability on the income approach. The subject property is an operating rancb and is located in a ranching area. It is currently operated by the Owner as a year around cow calf operation. The ranch also has the added amenity of being recreational oriented with big game hunting and fishing being on site and available in the immediate area (public lands). The ranch consists of irrigated lands. and mountain pasture. It exhibits good scenic amenity. easy access and overall has good market appeal. - - - - - - - 24 - -