The 3 Appraisal Methods & Building Numbers

First Independent Bank appraised the building around 2002 & again 2005-2007 for $225,000.00

Cost Approach
The cost approach is not commonly used. The primary assumption of this method is that the value 
is the same as the cost to construct the property or replacement cost. This method requires an in-depth knowledge of construction and material costs.

If this method was used, maybe because it is a old building with approximately 9500 Sq. ft. - We could do 2 estimates. 

#1 - As stated above with new construction cost or replacement cost. Which would be too high as even if we used a low price per sq. ft. of $50.00, it would then be $475,000.00.00 - They always say you get a lot of building for your money with older buildings.
New cost or replacement value: $475,000.00

#2 - Original purchase price, then add the cost of the improvements & remodeling cost. The original purchase price was $82,000.00 - The 3 different phases of remodeling total $130,000.00 for a total of $212,000.00.

#2 Cost Approach Value: $212,000.00

Sales Comparison/Market Approach
This is the method most are familiar with as it is the accepted method for valuing residential real estate. Typically this method involves selecting properties with similar characteristics in the the same market area that have recently sold. Once those properties are found they are compared to the property in question and a professional appraiser will deduct value from the subject property for comparative deficiencies and increase 
value for advantages. Typically this method is required if the investor is seeking conventional financing.

With the lack of sales, or low sale prices for a building of this nature, it would be difficult to substantiate the real & true value of this property.

Use Value
"Use Value" is a term that may also be worth consideration. While a particular property may not have mass appeal in the market, it may serve the needs of a business owner so well that it may be worth above current market value to the business owner.
If a business building allows the business owner to operate at a advantage because of location or because of its appeal to their clients, or employees, the business or building owner may be willing to pay "Above Market Prices" because of the "Unique Factors" of the property that allow them to have the value added equity of "Use Value".  

Use Value Value: $150,000.00


Income Approach

The income approach is used to estimate the market value of income producing properties such as office buildings, warehouses, apartment buildings and shopping centers.

Hair Salon:       $500.00
Flower Shop:    $500.00
Photography:    $500.00
Total:              $1,500.00/month x 12 = $18,000.00 Yearly x the life of the loan of 15 years, the property would generate $270,000.00.

Sale price: $150,000.00
with a 15 year amortization @ .05% payments would be $989.00 with a total payout with interest of $237,584.00.

Even with interest, the property will generate a surplus of $32,416.00 that could be applied to maintenance & insurance.

Income Approach Value: $270,000.00



Total value of the building 

If you take these 3 Appraisal Values & add them together & divide them by 3.
Cost Approach #2 lower method: $212,000.00
Use Value:                                       $150,000.00
Income Approach:                          $270,000.00
Total                                                 $632,000.00
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Divided by 3 for average:               $158,000.00 

Final Value: $158,000.00