Formal property appraisals play a key role in the final determination of individual property values, and therefore in the final determination of parcel-specific ROW (right of way) costs. The most common and accepted valuation method is the sales comparison approach, which requires access to recent and relevant arms-length sales data. Other accepted valuation methods include the income and the cost approaches (FHWA, 2002a, Wurtzebach and Miles, 1991). The income approach may be used for commercial or investment properties, by considering gross rent, vacancy rates, and typical operating expenses, in order to estimate net income. The cost approach evaluates the replacement cost, and subtracts depreciation or obsolescence of the existing structure. This last approach is only used in cases where special purpose improvements develop the property to its highest and best use (FHWA, 2002a). In addition to being the most common and accepted method, the sales comparison approach is generally the easiest method to use. Comparable sales, listings, or rental data may be obtained from appraisal districts, title companies, private appraisers, and/or online data services. This method is most helpful in assessing the value of single-family residential properties and raw land, where sales data are plentiful (Wurtzebach and Miles, 1991). Sales data for commercial properties are relatively limited and more difficult to obtain (Carey, 2001, Gatzlaff and Geltner, 1998). This research enhances the literature by providing predictions of commercial property values, based on a large sample of commercial sales transactions for Texas’s major metro areas. These data are described in the Data Assembly section.

Cited from (http://www.ce.utexas.edu/prof/kockelman/public_html/TRB04ROW.pdf)

By Jared D. Heiner

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