Principles and Methods

In real estate appraising, principles must be applied first, then the methodologies which correspond to these principles. It is easy to get distracted by the process, without attempting to see what is really going on with a certain property type. Real estate principles such as supply and demand, anticipation, change, and substitution are the foundation to real estate value. The “value” must start and flow from these principles…not from the methodologies (Direct Cap / DCF / Cost / Multipliers, etc.). If the market is not demanding a certain product, then it doesn’t matter what method is applied. Consider this quote, which helps drive home the point (not trying to get too philosophical):

“As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.” - Ralph Waldo Emerson