Definitions and other terms used herein are as follows:

Reproduction Cost New: The current cost of producing a new replica of a  property with the same or closely similar materials, as of a specific date.

Replacement Cost New: The current cost of a similar new property having the nearest equivalent utility as the property being appraised, as of specific date.

Depreciation (Appraisal): The actual loss in value or worth of a property from all causes including those resulting from physical deterioration, functional obsolescence and economic obsolescence.

Physical Depreciation/Deterioration: The loss in value or usefulness of a  property due to the using up or expiration of its useful life caused by wear and ear, deterioration, exposure to various elements, physical stresses and similar factors.

Orderly Liquidation Value: It’s the estimated amount of money a company’s assets could quickly be sold for if the company went out of business.

There are three basic appraisal methods that are used to derive an indication of the value of the assets; the Cost Approach, the Sales Comparison (Market) Approach and the Income Approach.

The cost approach is defined as “that approach which measures value by determining the current cost of an asset and deducting for the various elements of depreciation, physical deterioration and functional and economic obsolescence.” The cost approach is based upon the current cost of a like of similar asset, adjusted for depreciation in order to determine a value of the asset. Typically additional costs, such as sales tax, freight and installation, can be included to determine replacement cost. However, because the purpose of the appraisal is to determine the Fair Market Value- As is, Where is, these represented “soft costs” have not been included. Replacement cost new is typically estimated using one of two approaches, indirect and direct. The indirect approach applies equipment-specific indices to the historical cost of an asset to estimate current replacement cost. The direct approach involves using published sources, cost estimating techniques and input from dealers and manufacturers to estimate current replacement cost new.

The sales comparison or market approach to value is defined as “that approach to value where recent sales and offering prices of similar property are analyzed to arrive at an indication of the most probable selling price of the property being appraised.” Using similar units of comparison, adjustments are made to the comparable assets for various factors including condition, capacity, age, etc. to correlate to the subject asset. It is assumed that market transactions are conducted between willing buyers and the willing sellers in an arm’s length transaction. The sales comparison approach is most reliable when there is an active market providing as sufficient number of sales of comparable property that can be independently verified through reliable sources.

Sales Comparison (Market) Approach

Cost Approach

Premier Lab Brokers, LLC
7415 County Road W
Paradise, MO 64089