A search of appraisal literature reveals a total void in articles or textbooks that discuss the valuation of property with declining future utility other than that implied by using the income approach. Focusing on current utility or utilization alone, particularly when the cost approach is considered the most reliable indicator of value, omits critical steps from the appraisal process. The failure to consider future utility is shortsighted in the true sense. A property’s expected future use cannot be ignored in an appraisal, in the same way that a buyer does not ignore the future prospects for use. The future use is most clearly defined by the income approach, but declining utility also must be considered and quantified in the sales comparison and cost approaches. This article discusses each of these approaches.
This paper was first presented at the Property Tax Symposium held October 31 - November 3, 2010 in Austin, Texas. The symposium was sponsored by the Institute for Professional Taxation.
Spletter, K. G. (2011). Appraising properties with declining utility. Journal of Property Tax Assessment & Administration, 8(4), 25-36. Retrieved from https://researchexchange.iaao.org/jptaa/vol8/iss4/3