Modern Real Estate Practice in Illinois Chapter 19: Real Estate Appraisal

© 2008 Dearborn Real Estate Education Appraising Regulation of Appraisal Activities Illinois Appraiser Categories –Associate Real Estate Appraiser –Certified Residential Real Estate Appraiser –Certified General Real Estate Appraiser Comparative Market Analysis

© 2008 Dearborn Real Estate Education Value Demand –The need or desire for possession ownership, plus final capacity Utility –Usefulness for its intended purposes Scarcity –A finite supply Transferability –Relative ease with which ownership rights are transferred from one person to another

© 2008 Dearborn Real Estate Education Value Market Value versus Market Price Market Value versus Cost

© 2008 Dearborn Real Estate Education Value Basic Principles of Value –Anticipation –Change –Competition –Conformity –Contribution –Highest and Best Use –Increasing and Diminishing Returns –Plottage –Regression and Progression –Substitution –Supply and Demand

© 2008 Dearborn Real Estate Education Three Approaches to Value Sales Comparison Approach –Opinion of value is obtained by comparing the property being appraised (subject property) with recently sold comparable properties.

© 2008 Dearborn Real Estate Education Three Approaches to Value Cost Approach –Reproduction cost –Replacement cost –Determining reproduction or replacement cost new Square-foot method Unit-in-place method Quantity-survey method Index method

© 2008 Dearborn Real Estate Education Three Approaches to Value Cost Approach (cont.) –Depreciation Physical deterioration Functional obsolescence External obsolescence Straight line method

© 2008 Dearborn Real Estate Education Three Approaches to Value Income Approach –Gross rent or gross income multipliers Reconciliation –Art of analyzing and effectively weighing the findings from the three approaches

© 2008 Dearborn Real Estate Education The Appraisal Process The key to an accurate appraisal lies in the methodical collection and analysis of data –General Data Nation, region, city, and neighborhood –Specific Data Details of the subject property and comparables Appraiser’s Report