1. Appraisal principles
Massimo Cerrato

2. Definition
Estimate teaches how to give technical or economical judgments on an asset for a specific purpose

3. Are all the economic assets
Appraisal subject
Are all the economic assets
Tangible
(land, buildings ...)
Intangibles
(rights, obligations ...)

4. Estimate judgement
The fundamental nature of the estimate judgment is predicting
To be objective it must be based on a logical estimate method

5. Price VS estimated value
Certain and historic data which manifested itself during a transaction
Estimated value
Probabilistic data; it depends on the estimate purpose

6. Ordinariness principle
Estimate cardinal principle which considers, in a preliminary assessment, an asset in the normal situation that is generally more widespread, therefore most likely
In a second step, the resulting ordinary value, might eventually be corrected if the asset has different characteristics from comparables

7. Addictions/Deductions
Ordinary value
Addictions/Deductions
Real value

8. Ordinary value It is the normal value, the one with maximum frequency
Ord V
Max f
Under estimate
Over estimate

9. The four appraisal steps
1 - Question interpretation
2 - Economic aspect choice
3 - Estimate method application
4 - Final judgment

10. Step 1 - Question interpretation
Estimate purpose identification
Key step, delicate, eventually to be clarified with the customer

11. Step 2 – Economic aspect choice
It must be the most suitable for the appraisal purpose
The estimated value may be different depending on the considered economic aspect
Market value
Cost value
Capitalization value
Transformation value
Surrogacy value
Complementary value

12. Step 3 – Estimate method application
The appraisal method is the logical process to find an objective assessment
It is unique and comparative, that is based on the comparison

13. Step 3 – Estimate method application
It provides
Reliefs
Surveys
Data processing …

14. Step 3 – Estimate method application
It can be applied in two different ways
Synthetical approach
Analytical approach

15. Synthetical approach It is based on little data
It provides a final synthetic calculation
Being able to adequately judge the quality of the subject asset and find right comparables is at the heart of the synthetic comparison approach ?

16. Analytical approach
It is based on a detailed analysis of the components that affect value
The data to process are many
Example of the analytical procedure is the income approach to probable market value

17. Step 3 – Estimate method application
It is divided into two phases
Values scale construction
Insertion on the right step of the scale

18. Step 3 – Estimate method application
It uses two types of parameters
Technical
(ie. surface, volume ....)
Economic
(ie. rent, cadastral income...)

19. Step 3 – Estimate method application
It consists in an initial search of the ordinary value and later in its correction if the subject asset is different from ordinariness
The more information provided, the more reliable the final judgment is

20. 4 – Final judgement
Question solution contained in a well structured valuation report

21. Economic aspects Market value Cost value Capitalization value
Transformation value
Complementary value
Surrogacy value

22. Market value
The price at which an asset could change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts

23. Can not be used for assets that have no market (ie
Can not be used for assets that have no market (ie. public buildings, churches, castles, ancient buildings ...)
It is the most common economic aspect in assessments

24. The asset market value depends on two types of features
Intrinsic
Extrinsic

25. Intrinsic features
Related to the specific asset

26. Intrinsic features
For land
Fertility
Size
Drainage...

27. For building areas (lots)
Intrinsic features
For building areas (lots)
Building index
Size
Shape...

28. Intrinsic features
For buidings
Finish
Age
Maintenance state...

29. Related to the environment
Extrinsic features
Related to the environment
Location
Street
Infrastructures...

30. Cost value Production cost Reproduction cost
Probable cost that an ordinary contractor should support to produce a not existing asset
Reproduction cost
Probable cost that an ordinary contractor should support to reproduce an existing asset
It considers the asset state at the appraisal time by a correction factor

31. Applications Construction cost Damages appraisal
Machines management cost
Agricultural production cost...

32. Capitalization value
Probable asset value obtained by using its future net incomes
Coincides with the market value if the rate used is the real estate one

33. Application Mortgage remaining debt Usufruct Annuity
Maximum purchase price of an asset for a certain yield

34. Transformation value
Probable value of an asset which can ordinarily be trasformed
It is identified with the value resulting from the transformation

35. It corresponds with the difference between the probable market value of the transformed asset and the probable processing cost
As to the building, it can be used when the transformation is legally and technically feasible and economically viable
Transf. cost
Market value
Transf. value

36. Applications Building areas Demolition value
Value of added floors on an existing building
Trasformation cost-effectiveness

37. Complementary value
Is the difference, for an asset which is part of a property, between the probable market value of the whole property and the remaining or original part
It’s the loss or benefit for the remaining or original part

38. Applications Partial expropriations Breaking of planning rules
Right to build value

39. Surrogacy value
Probable market value or cost of an asset which can provide a similar utility
It is rarely used and only in case of market lack (ie., fodder, manure ...)

40. Key words

41. Key words
Video 1
Video 2
Video 3
Real estate appraisal
Crosswords
Multiple choice
Cloze