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Chapter 17 Real Estate Appraisal

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Provisional licensed real estate appraiser. Appraiser trainee ... Society of Real Estate Appraisers. NATIONAL Association of Independent Fee Appraisers ... – PowerPoint PPT presentation

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Title: Chapter 17 Real Estate Appraisal


1
Chapter 17Real Estate Appraisal
  • _________________________

2
Appraisal
  • 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

3
Valuing a House Market Comparison Approach
2,960
-2,700
-7,560
4
Competitive Market Analysis
5
Calculating Gross Rent Multiplier
Building
Sales 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
196,000
27,762
7.06
As a Group
805,000
115,002
7.00
6
Costs Approach to Value
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
7
Square-foot Method of Cost Estimating
8
Income Approach
Variation by Direct Capitalization
Income / Rate Value
18,000 / 0.09 200,000
9
Projected Annual Operating Statement (Pro Forma
Statement)
Operating expense ratio 31,070 / 79,800
38.9
10
Direct Capitalization Using an Overall Rate
Income Overall Rate
Value
45,400 0.09376
484,215
11
(No Transcript)
12
Overall Rates - 10-year Holding Period,
25-year Loan for 75 of the Purchase Price, 10
Investor Return
13
Reconciliation
Market Approach 180,000 x 75
135,000 Cost Approach 200,000 x 20 40,00
0 Income Approach 160,000 x 5
8,000 Final Indicated Value
183,000
14
Types of Appraisals andReporting Options under
USPAP
Types of Appraisals
  • Complete appraisal
  • Limited appraisal

Reporting Options
  • Self-contained appraisal report
  • Summary report
  • Restrictive report

15
Formats of Appraisal Reports
  • Letter report
  • Form report
  • Narrative report
  • Review appraisals
  • Real estate analysis

16
Appraiser License
  • Certified General Appraiser
  • Certified Residential Appraiser
  • State licensed appraiser
  • Provisional licensed real estate appraiser
  • Appraiser trainee

17
Principles of Value
  • 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

18
Value
  • Market value
  • Assessed value
  • Insurance value
  • Loan value
  • Estate tax value
  • Plottage value
  • Rental value
  • Replacement value

19
Markets
  • Buyers market excess supply of housing for
    sale.
  • Sellers market demand exceeds supply.

20
Professional Appraisal Societies
  • 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

21
Key Terms
  • 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
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