Download - Chapter 11
Chapter 11
Real Estate Appraisal
Appraisal Regulation
FIRREA of 1989 Appraisal Foundation
AQSB ASB
Trainee appraisers Licensed appraisers Certified residential
appraisers Certified general appraisers USPAP
Standard 1 (and rules)
What is Value?
Market value Typically motivated parties Well informed parties Market exposure Payment in cash No special circumstances
Investment value – worth to a particular investor based on that investor’s personal standards of investment acceptability
Price versus market value Market value versus cost of production Other types of value
Assessed value Insurable value
Key Appraisal Principles
Anticipation Change Substitution Contribution
The Appraisal Process
Definition of the problem Type of value-purpose Description of property Specific property rights Effective date
Data selection and collection General market analysis Specific property analysis
Highest and best use analysis As though vacant As improved
Application of the three approaches to valuation Sales comparison approach Cost approach Income approach
Reconciliation of value indications Report of defined value
Sales Comparison Approach
Comparable sales data selection Adjustment of sales data Elements of comparison
Property rights conveyed Conditions of sale Financing terms Market conditions Locational characteristics Physical characteristics
Applying the sales comparison approach
Cost Approach
Estimating site value Estimating production cost
Reproduction cost Replacement cost
Estimating accrued depreciation Physical deterioration Functional obsolescence Economic obsolescence
Applying the cost approach
Income Approach
Gross income multiplier GIM = Value/Gross Income
Net income capitalization Capitalization Rate = Net
Income/Value Discounted cash flow