Appraisal approach

Appraisal approach,

Definition of Appraisal approach:

  1. The appraisal approach describes the process of estimating an asset's value, based on factors such as its cost, the income it generates, and its fair market value (FMW) compared to that of similar assets. The resulting appraisal figure is essentially an educated guess that attempts to forecast the price an asset would likely fetch in a free market. While appraisals are typically performed in conjunction with a sale of an item, they may also be conducted for insurance or taxation purposes.

  2. Method used in estimating the market value of a business, business ownership interest, intangible asset, property, or security. The three common appraisal approaches are: (1) cost approach, (2) income approach, and (3) market comparison approach. Also called appraisal method.

  3. The appraisal approach is used to determine the worth of high-value assets such as real estate properties, objects of art, jewelry, vehicles, financial interests in oil fields, and other alternative assets. The values of these items are difficult to quantify because they don't change hands often enough to reliably generate current market prices the way publicly-traded stocks and other securities do. Consequently, the value of such items must be estimated by qualified individuals known as appraisers.

How to use Appraisal approach in a sentence?

  1. A dollar value is assigned based on factors such as the asset’s cost, the income it generates, and its fair market value compared with that of similar assets.
  2. The appraisal approach is a procedure for determining an asset's value using an appraisal, rather than relying on market transaction pricing.
  3. It is usually performed in conjunction with a sale of an asset, or for insurance or taxation purposes.
  4. Appraisals are essentially educated guesses as to the price assets would fetch in a free market.

Meaning of Appraisal approach & Appraisal approach Definition