This is an evaluation by a commercial real estate broker to estimate a property’s market value using three standard methods: Cost, Income, and Direct Comparison.
- Cost Approach: Ideal for unique or seldom-sold properties, this method calculates replacement costs, deducts depreciation, and adds land value for an overall estimate. Common for industrial properties, grain elevators, gravel pits, and warehouses.
- Income Approach: Used for income-generating properties, it analyzes potential earnings compared to similar properties to determine value, focusing on the capitalization rate calculated from income and sale price. Suitable for hospitality, industrial malls, multi-residential buildings, office buildings, and shopping centers.
- Direct Comparison Approach: Compares recent sales of similar properties to determine value, typically used for residential properties, condominiums, and vacant land.
Note: The broker’s fee for this service is not tied to the property’s estimated value, adhering to ethical standards that prevent conflicts of interest.
