In appraisal proposition, there are three approaches to determining the request value of objects expensive, relative and profitable. According to the Property Valuation Law, the Reviewer must apply all three approaches or justify the turndown to apply one or another approach.
The relative approach is a set of styles for assessing the value of the appraisal object, grounded on comparing the appraisal object with analogue objects of the appraisal object, for which information on prices is available.
The relative approach is grounded on the fact that request realities carry out purchase and trade deals by analogy, that is, grounded on information about analogous deals. It follows that this approach is grounded on the principle of negotiation. In other words, the approach is grounded on the supposition that a prudent buyer for a property put up for trade will pay no further than that for which you can buy an object of analogous quality and felicity.
The prerequisites for the assessment system within the frame of the relative approach are oscillations in force and demand in different ages of time.
When applying the relative approach, the reviewer relies on the following principles
• the principle of force and demand( there is a relationship between the need for a property and the limited force of it);
• negotiation principle( an informed, reasonable buyer won’t pay further for a property than the accession( offer) price in the same request of another property with analogous mileage).
In order to calculate the real estate object using a relative approach, the expert uses for analysis a large database of deals deals in the member of the property being valued.
Stages of a relative approach
Real estate appraisal goes through several main stages
1. The trends of the member of the real estate request in which the assessment is supposed to be carried out are studied. At this stage, a full- scale relative analysis of all parcels that have been estimated fairly lately is carried out.
2. Information is collected about analogue objects, with respect to which a relative specific can be made.
3. The parallels and differences between the objects are determined and the request value is compared.
4. The price of the delved object is corrected.
The advantages of the Property valuation system is that it completely takes into account the factors that have at least some influence on the price, as well as the opinion of merchandisers and the desire of buyers who put analogous objects on the request. This allows you to acclimate the cost. Also, this system is relatively dependable, since it takes into account profitable factors as well.