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© 2010 by Cengage Learning Real Estate Appraisal Chapter 18 ________________ Real Estate Appraisal
© 2010 by Cengage Learning An estimate of value. Three approaches to estimating value: ◦ Market – comparable sales data ◦ Cost – construction cost plus land value ◦ Income – monetary returns of property capitalized
© 2010 by Cengage Learning
BuildingSales Price Gross Annual Rents Gross Rent Multiplier No.1$245,000 $34,900= 7.02 No.2$160,000 $22,988= 6.96 No.3$204,000 $29,352= 6.95 No.4 As a Group: $196,000 $805,000 $27,762 $115,002 = 7.06 = 7.00
© 2010 by Cengage Learning Step 1: Estimate land as vacant $ 30,000 Step 2: Estimate new construction cost of similar building $120,000 Step 3: Less estimated depreciation -12,000 Step 4: Indicated value of building $108,000 Step 5: Appraised property value $138,000 by the cost approach
© 2010 by Cengage Learning
Income / Rate = Value $18,000 / 0.09 = $200,000 Variation by Direct Capitalization
© 2010 by Cengage Learning Operating expense ratio: $31,070 / $79,800 = 38.9%
© 2010 by Cengage Learning Income Overall Rate = Value $45,400 0.09376 = $484,215
© 2010 by Cengage Learning
Market Approach $180,000 x 75% = $135,000 Cost Approach$200,000 x 20% = $ 40,000 Income Approach $160,000 x 5% = $ 8,000 Final Indicated Value $183,000
© 2010 by Cengage Learning Complete appraisal Limited appraisal Types of Appraisals Self-contained appraisal report Summary report Restrictive report Reporting Options
© 2010 by Cengage Learning 1. Letter report 2. Form report 3. Narrative report 4. Review appraisals 5. Real estate analysis
© 2010 by Cengage Learning Certified General Appraiser Certified Residential Appraiser State licensed appraiser Provisional licensed real estate appraiser Appraiser trainee
© 2010 by Cengage Learning Principle of Anticipation Principle of Substitution Highest and best use of a property Principle of competition Principle of supply and demand Principle of change Principle of contribution Principle of conformity Principles of Value
© 2010 by Cengage Learning Market value Assessed value Insurance value Loan value Estate tax value Plottage value Rental value Replacement value
© 2010 by Cengage Learning Buyer’s market – excess supply of housing for sale. Seller’s market – demand exceeds supply.
© 2010 by Cengage Learning The American Institute of Real Estate Appraisers (AIREA) ◦ MAI ◦ SRA Society of Real Estate Appraisers NATIONAL Association of Independent Fee Appraisers Farm Managers and Rural Appraisers National Society of Real Estate Appraisers American Society of Appraisers
© 2010 by Cengage Learning Appraisal Capitalize Comparables Cost approach Depreciation FIRREA Gross rent multiplier Highest and best use Income approach Market approach Market value Operating expenses Scheduled gross, Projected gross USPAP Key Terms
Chapter 11 APPRAISAL METHODS 371. The appraiser uses three appraisal methods and then correlates this data to arrive at a final valuation for a property.
INCOME CAPITALIZATION APPROACH TO VALUE A BASIC INVESTMENT PREMISE IS: THE HIGHER THE EARNINGS, THE HIGHER THE VALUE. THE PRINCIPLE OF ANTICIPATION.
©2011 Cengage Learning.
REAL ESTATE ECONOMICS AND VALUE Chapter 5. CHAPTER TERMS AND CONCEPTS Agents of production Amenities Demand Demography Economic forces Fiscal policy Gross.
Real Estate Principles and Practices Chapter 1 Real Estate and the Economy © 2010 by South-Western, Cengage Learning.
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The Valuation Process & Appraisal Reports Wayne Foss, MBA, MAI, CRE Foss Consulting Group
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CONCEPTS of VALUE. FACTORS OF VALUE UTILITY –THE ABILITY OF A PRODUCT TO SATISFY HUMAN WANTS. RELATES TO THE DAMAND SIDE OF THE MARKET. SCARCITY –THE.
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Welcome to the International Right of Way Association’s Course 400 Principles of Real Estate Appraisal.
SINGLE FAMILY HOUSING: PRICING, INVESTMENTS, AND TAX INVESTMENTS OBJECTIVES Analysis of Investment Property Tax and Depreciation Effects Appraisals Income.
CHAPTER SEVEN SINGLE FAMILY HOUSING: PRICING, INVESTMENTS, AND TAX INVESTMENTS.
NCGS & ● Requires Counties to Establish market values ● Value must be at or near 100% of current market value ● Utility companies requires.
Real Estate Appraisal: A World of Change John S. Brenan Director of Research and Technical Issues The Appraisal Foundation (202)
The valuation process I.Defining the problem i.Identification of the real estate to be appraised Address, common name, legal description ii.Identification.
Real Estate Investment Chapter 6 Property Taxes and Income Taxes © 2011 Cengage Learning.
Ch 9 Real Estate Appraisal. 2 Outline I. Appraisal Regulation II. The Concept of Value III. Key Appraisal Principles IV. The Appraisal Process 1. Sales.
Measurement is vital to the appraiser. Not just physical measurement in feet and inches, but measurement of value and cost. Chapter 18 Real Estate Appraisal.
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