The appraised value shall reflect the market value. There are different internationally recognized methods to achieve this.
There are two different appraise processes:
- Mass appraisal
- Single appraisal
There are 3 different methods of appraising properties:
- Sales comparison method
- Income method
- Cost method
Mass appraisal and single appraisal
In most cases mass appraisal is used. Single appraisal is done only in exceptional cases, for example for complex industrial buildings, where the market is very limited. For the first appraisal of all parcels in Kosovo (performed 2018) only mass appraisal was used.
In mass appraisal, the method used is normally the sales comparison method.
Methods of appraisal
There are three different methods of appraising properties:
- Sales comparison method
- Income method
- Cost method
The most commonly used method is the sales comparison method. It is used when there is sufficient market information available. When there is a lack of market information one of the other methods is used to perform appraisal.
Sales comparison method
In the sales comparison method, the market value is estimated based on the price at which similar properties in the area have been sold.
Income method
The income method can be used if there is sufficient information about the income a property generates. This method is mainly used for properties that are rented out such as offices and shops etc. Income method can be used in both single and mass appraisal.
In the income method, the net income from the property is capitalized.
Cost method
The cost method is used for industries and other properties with special purposes where the market is very limited. Cost method is only used in single appraisal.
In the cost method, the value of an object is determined based on the cost to build an equivalent building. Physical deterioration and functional obsolescence is also taken into account.
Appraisal methodology used in Kosovo is described in the Administrative instruction on Appraisal Methodology.