Appraisal Approach

Posted in Finance, Accounting and Economics Terms, Total Reads: 2007

Definition: Appraisal Approach

Appraisal approach is about evaluating the price of an asset, which it would fetch in a free market. Appraisal Approaches are the procedures followed to estimate the market value of tangible or intangible assets. The approach is generally carried out to measure the worth of valuable assets like jewelry, vehicles and real estate. Estimation of value of such assets is necessary for their sale or insurance purposes. The appraised value is not always equal to the asset’s market value. The buyers have to pay for what the asset is worth to them.


Appraisal approach has 3 categories. They are as follows:

-          Cost Approach: In this approach, the value is estimated on the basis of costs incurred in making of the asset. It includes cost factors like manufacturing, transportation etc.

-          Income Approach: The market value is estimated on the basis of income the asset generates.

-          Market Comparison Approach: The worth of similar assets in the market is observed and it forms the basis of our asset value estimation.

Hence, this concludes the definition of Appraisal Approach along with its overview.

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