Determine the most probable Market value of the object, at what price the object can be sold on the date of assessment, in an open market under competitive conditions.

The value of real estate is divided into the following types:

  • market value;
  • investment value;
  • cadastral value;

Investment value is the value of the object of evaluation for a particular person or group of persons under the investment objectives for the use of the object of evaluation set by the person (persons).

In determining the investment value of the assessed object the value is determined for a particular person or group of persons under the investment objectives established by the person (persons) to use the object of assessment – investment property to obtain income in the form of rent and growth in value. In determining the investment value, unlike in determining the market value, taking into account the possibility of alienation at investment value in the open market is not mandatory.

In determining the cadastral value of the assessment object, the market value established and approved in accordance with the legislation governing the cadastral assessment is determined by mass valuation methods. The cadastral value is determined by an appraiser, in particular, for taxation purposes.

Principles of evaluation

As part of his activities, the real estate appraiser is guided by a number of principles:

  • User Principles – reflect the end user’s point of view;
  • Principles of the external market environment;
  • Principles related to the subject property;
  • The principle of best and most efficient use.

There are several approaches to the valuation of any type of real estate used by professional appraisers:

  • comparative approach;
  • cost approach;
  • income approach.

Within each of the 3 approaches, there are specific techniques.

Income approach

The income approach to the valuation of real estate is based on determining the value of the property on the basis of the expected income from the possession (use) of the object. This indicator is very important because it allows you to predict the value of the object in the future.

The income approach is one of the most used methods of real estate valuation in valuation practice to date.

The cost approach

The cost approach (asset-based approach) – a set of methods of evaluation, in which the cost of the object is equal to the sum of the cost of the land and the cost of reproduction (replacement) of all improvements, net of accumulated depreciation, and the cost of liabilities, that is, the cost of the object depends on the cost of creating a similar object. This approach is used to evaluate freestanding buildings, homes, businesses.

Comparative approach

Comparative approach is a set of methods of evaluation of the cost of the evaluated object, based on comparison of the evaluated object with the objects-analogues of the evaluated object, in relation to which there is information about the prices. The analogue of the evaluated object for the purposes of evaluation is an object similar to the evaluated object by the main economic, material, technical and other characteristics that determine its value

Sales comparison method

is based on statistical monitoring and factor analysis of the market segment to which the evaluated property belongs.

The main stages of application of the method:

– position of the object, the choice of market segment to which the object belongs, taking into account the analysis of the most effective use;

– market analysis;

– factor analysis;

– selection of analogues;

– cost calculation.