The most commonly-used approach for valuing sites is the method

Thinking of property valuation is like a big expenditure? Then you are completely wrong. It is an investment knowing the actual value of your property which is beneficial for you from various aspects. Whether you want to sale the property, purchase any property or want to keep it on rent. The value of your investment property should be known to you.
So to know the property valuation (which is must for insurance and taxes too). Thus it is good to ask property valuers melbourne to find the fair value of your real estate property.

How to find the property valuation then the answer is - through home appraisal. A home appraisal is the professional opinion given by property valuer about the value of real estate property. An appraiser is an expert who determines the fair market property’s value. Though various factors like geographical locations, market conditions affect the property value.

Comparison method - The sales comparison approach method is the most common among all the property valuation methods. It is commonly used for land valuation and residential building valuation. In this one compare the subject property with the same type of property as the name of the method suggested. The properties used in this method to evaluate the price of the property are called as comparables. The consideration factor of comparables are they should be same like subject property and should be sold within a year under normal market conditions.
Mostly three four comparables will be needed to evaluate the property value. It’s next to impossible to find the two comparables exactly like the subject property. So the question arises then how this method can be accurate to find the property value?

So to adjust the difference among comparables some adjustments are made. As various factors are being taken into consideration like location of the property, market status or conditions, physical aspect of the property like interior and exterior of the property, age of the property and more.

2. Cost Approach - Among the main property valuation methods the second most common is cost approach. Though it is not useful for the valuation of residential property or income property. This method is commonly used and applied on the real estate properties which are usually constructed but not sold like schools, institutes, government buildings, hospitals and more.

Firstly the property land should be estimated then the building cost. Though there are various ways to estimate the building cost. After finding the property valuation i.e cost of building and land value the depreciation costs are subtracted. Mainly three types of depreciation are considered like physical deterioration, functional obsolescence, economic obsolescence.

The cost approach is a real estate valuation method that estimates the price a buyer should pay for a piece of property is equal the cost to build an equivalent building. In the cost approach, the property's value is equal to the cost of land, plus total costs of construction, less depreciation. It yields the most accurate market value for when a property is new than through alternative methods.

The cost approach is one of three valuation methods for real estate; the others being the income approach and the comparable approach.

• The cost approach to real estate valuation considers the value should equal the total cost to build an equivalent structure.
• The cost approach considers the cost of land, plus costs of construction, less depreciation.
• The cost approach is considered less reliable than other real estate valuation methods, but can be useful in certain cases such as when evaluating new construction or a unique home with few comparables.

Instead of focusing on the prices other, similar homes in the area are selling for, or a property’s ability to generate income, the coast approach method values real estate by calculating how much the building would cost today if it were destroyed and needed to be replaced from start to finish. It also factors in how much the land is worth and makes deductions for any loss in value, otherwise known as its depreciation.

The logic behind the cost approach is that it makes little sense for buyers to pay more for a property than what it would cost to build from scratch. 

There are two main types of cost approach appraisals:

1. Reproduction method: This version considers what a replica of the property would cost to be built and gives attention to the use of original materials.
2. Replacement method. In this case, it is assumed that the new structure has the same function but with newer materials, utilizing current construction methods and updated design.

When all estimates have been gathered, the cost approach is calculated in the following way:

cost – depreciation + land worth = value of the property.

The cost approach can be less reliable than the income and comparable methodologies in practice. It requires certain assumptions, including taking for granted that there is enough available land for the buyer to build an identical property.

Moreover, if comparable vacant land is not available, the value must be estimated, which makes the appraisal less accurate. The lack of similar building materials also reduces the accuracy of the appraisal and increases room for subjectivity. Calculating depreciation on older property is not straightforward and easily measurable, either.

Despite these limitations, there are a few cases where the cost approach can be useful and even necessary. Valuing the various components of real estate separately is especially helpful when dealing with property that is new or differs from others in unique ways.

The cost approach is required and sometimes is the only way to determine the value of exclusive-use buildings, such as libraries, schools or churches. These resources generate little income and are not often marketed, which invalidates the income and comparable approaches.

The cost approach is often used for new construction, too. Construction lenders require cost approach appraisals because any market value or income value is dependent upon project standards and completion. Projects are reappraised at various stages of construction to enable the release of funds for the next stage of completion.

Insurance appraisals tend to use the cost approach when underwriting homeowners' policies or considering claims because only the value of improvements is insurable and land value is separated from the total value of the property. The choice between depreciated value and full replacement or reproduction value is the determining factor for the evaluation.

Finally, the cost approach is occasionally relied on to value commercial property, such as office buildings, retail stores, and hotels. The income approach is the main method used here, although a cost approach may be implemented when design, construction, functional utility or grade of materials require individual adjustments.

Most residential appraisals do not use the cost approach. Instead, sales comparisons usually drive market valuations of these types of properties.

When a cost approach appraisal comes in below market pricing, it can be a sign of an overheated market. Conversely, regular evaluations above market pricing may signal a buying opportunity.

An exception is if the property is under-improved or over-improved for its neighborhood. In this case, an accurate estimation of the value of improvements adds to the precision of the determination of value, which is not possible using only the comparable approach.