According to the Appraisal Institute, an appraisal is an unbiased estimate of the nature, quality, value or utility of an interest in, or aspect of, identified real estate and related fixed permanent personalty. The purpose of an appraisal is to provide an opinion, usually expressed in the form of an estimate, of value. Most often for funding transactions the value concept is Market Value, Orderly Liquidation Value, or Quick Sale Value. In order to complete a valuation initially the appraisal problem or issue is defined and the application of the report reviewed, the necessary work effort is planned, the data is collected and analyzed, with the indications of value from the different approaches logically and persuasively leading to a conclusion of value. In completing the valuation of subject real property, the conventional and accepted procedures to derive Market Value are the Cost, Sales (Market) Comparison, and Income Capitalization Approaches to value. The Cost Approach considers the concept of replacement as an indicator of value. A prudent investor would not pay more for an asset than the amount for which it could be replaced new. In the Cost Approach, an estimate of Replacement  or Reproduction Cost New is made to begin the valuation. Adjustments are then made to this estimate to reflect losses in value resulting from the various forms of depreciation. To the net value is added the Market Value of the land, assumed vacant and available. In the Sales (Market) Comparison Approach recent sales and listings of comparable properties are gathered and analyzed. Adjustments are then applied to these observations to reflect differences in location, time of sale, and physical characteristics between the subject property and the comparable, so as to indicate a Market Value of the subject property. The Income Capitalization Approach measures the present worth of anticipated future benefits. The net income or net cash flow is estimated over an appropriate period and then capitalized at an appropriate rate. The capitalization rate should reflect the cost of money, or pure interest, and the risk inherent in ownership of the subject property. A usual element of a real property appraisal is an opinion of the highest and best use of the realty. Highest and best use is defined as that reasonable and probable use that supports the highest present value, as defined, as of the effective date of the appraisal. Generally, the real property report will include a transmittal letter stating the purpose of the valuation, basis of value, valuation “as of” date, and the conclusion of value. An executive summary may follow the transmittal letter. The descriptive section of the report includes a summarization of the salient facts, presentation of area / neighborhood data, and a detailed description of the property being appraised. The highest and best use analysis often is separately presented.  Included in the valuation section is the Cost, Sales (Market) Comparison, and Income Capitalization Approaches to value and the conclusion of value. Appropriate exhibits will include regional / area maps, surveys, plot plans, comparable land sales, comparable rentals, comparable fee simple sales, and the professional qualifications of staff contributing to the appraisal effort.