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USACE REAL ESTATE SPD SWD NWD JOINT WORKSHOP San Diego, CA

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A Professional Real Estate Appraiser. One who is properly qualified to estimate value. ... Photographer. One Team - One Corps - One Fight. Feb 14, 2001. 4. What ... – PowerPoint PPT presentation

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Title: USACE REAL ESTATE SPD SWD NWD JOINT WORKSHOP San Diego, CA


1
USACEREAL ESTATESPD / SWD / NWDJOINT
WORKSHOPSan Diego, CA
February 14-15, 2001
2
A Professional Real Estate Appraiser
  • One who is properly qualified to estimate value.
  • To be considered competent, or an expert, one
    should have
  • the ability to assemble and evaluate competently,
    the appropriate, adequate and pertinent data
  • the necessary background and experience
    (particularly with respect to the type of
    property being appraised)
  • the essential personal characteristics of
    integrity, sound judgement, and willingness to
    work
  • a thorough familiarity with the stimuli
    motivating market action and reaction
  • a thorough familiarity with techniques and
    methods of presentation.

Feb 14, 2001
One Team - One Corps - One Fight
3
The Many Hats of an Appraiser
  • Accountant, mathematician
  • Mapping expert
  • Engineer, architect, draftsman
  • Financial analyst, investor
  • Banker, lender
  • Teacher
  • Consultant
  • Construction inspector
  • Soil scientist
  • Electrician, plumber
  • Photographer

One Team - One Corps - One Fight
Feb 14, 2001
4
What is an Appraisal?
  • An unbiased estimate of the nature, quality,
    value, or utility of an interest in, or aspect
    of, identified real property.
  • The act or process of estimating value.
  • The purpose of an appraisal is the stated scope
    of an appraisal assignment, i.e., to estimate a
    defined value of any real property interest.
  • Appraising is more of an art than a science.
  • Appraisal does not determine value

Feb 14, 2001
One Team - One Corps - One Fight
5
Operating Guidance
  • P.L. 91-646
  • FHWA/DOT Implementing Guidance, 49 CFR
  • http//www.access.gpo.gov/nara/cfr/waisidx_00/49cf
    r24_00.html
  • The YELLOW BOOK
  • http//www.usdoj.gov/enrd/land-ack/
  • ER 405-1-12, Chapter 4 APPRAISAL
  • http//www.usace.army.mil/inet/usace-docs/eng-regs
    /er405-1-12/toc.htm
  • USPAP
  • https//www.appraisalfoundation.org/uspap2001/toc.
    htm

Feb 14, 2001
One Team - One Corps - One Fight
6
Operating Guidance (continued)
  • FPMRs
  • 41 CFR 101-47.303-4 and 47.304-9
  • 41 CFR 101-18
  • SPECIAL LEGISLATION
  • OTHER DOD GUIDANCE, ARs, AND ERS
  • CUSTOMER POLICIES
  • EPA requirement to release appraisals

Feb 14, 2001
One Team - One Corps - One Fight
7
Market Value Definitions
  • Market Value The amount in cash, or on terms
    reasonably equivalent to cash, for which in all
    probability the property would have sold on the
    effective date of the appraisal, after a
    reasonable exposure time on the open competitive
    market, from a willing and reasonably
    knowledgeable seller to a willing and reasonably
    knowledgeable buyer, with neither acting under
    any compulsion to buy or sell, giving due
    consideration to all available economic uses of
    the property at the time of the appraisal. (per
    The Yellow Book - 2000)
  • Market Value The most probable price, as of a
    specified date, in cash, or in terms equivalent
    to cash, for which the specified property rights
    should sell after reasonable exposure, in a
    competitive market under all conditions requisite
    to a fair sale, with the buyer and seller each
    acting prudently, knowledgeably, and for
    self-interest, and assuming that neither is under
    undue duress. (per Appraisal Institute)

Feb 14, 2001
One Team - One Corps - One Fight
8
Other Definitions
  • Price the amount a particular purchaser agrees
    to pay and a particular seller agrees to accept
    under the circumstances surrounding their
    transaction.
  • Cost the total dollar expenditure for labor,
    materials, legal services, architectural design,
    financing, taxes during construction, interest,
    contractors overhead and profit, and
    entrepreneurial overhead and profit.
  • Cost as considered by appraisers, applies to
    production, not exchange, and is either an
    accomplished fact or a current estimate.
  • Cost is considered the amount of money it takes
    to create something

Feb 14, 2001
One Team - One Corps - One Fight
9
More Definitions
  • Fee Simple Estate Absolute ownership
    unencumbered by any other interest or estate,
    subject only to the four powers of government.
  • Those four powers of government
  • Taxation
  • Police power
  • Escheat
  • Eminent domain

Feb 14, 2001
One Team - One Corps - One Fight
10
Still More Definitions
  • Leased Fee Estate an ownership interest held by
    a landlord, with the right of use and occupancy
    conveyed by lease to others the rights of lessor
    (the leased fee owner) and leased fee are
    specified by contract terms contained within the
    lease
  • Leasehold Estate a real property interest held
    by a lessee (the tenant and renter) and conveying
    the right of use and occupancy for a stated term
    and under certain conditions

Feb 14, 2001
One Team - One Corps - One Fight
11
Other Types of Value
  • Value in Use
  • Investment Value
  • Going-concern Value
  • Insurable Value
  • Assessed Value
  • Mortgage Value
  • The appraisal industry is market value
    oriented, and bundle of rights oriented.
  • Book Value
  • Rental Value
  • Liquidation Value
  • Salvage Value
  • Scrap Value
  • Cost vs Market Value
  • Price vs Market Value

One Team - One Corps - One Fight
Feb 14, 2001
12
Factors of Value
  • Utility
  • Scarcity
  • Desire
  • Effective purchasing power
  • Must have all four to maximize value

Feb 14, 2001
One Team - One Corps - One Fight
13
Appraisal Principles Concepts
  • Anticipation
  • Change
  • Supply and Demand
  • Competition
  • Substitution
  • Opportunity Cost
  • Balance
  • Contribution
  • Surplus Productivity
  • Conformity
  • Externalities

One Team - One Corps - One Fight
Feb 14, 2001
14
Value Influences
  • Anticipation - the perception that value is
    created by the expectation of benefits to be
    derived in the future
  • Change - the result of the relationship between
    cause and effect that affects real property value
  • Depreciation - a loss in property value from
    various causes.
  • deterioration
  • obsolescence
  • Real estate markets are inefficient and inexact

Feb 14, 2001
One Team - One Corps - One Fight
15
Highest Best Use
  • defined as The reasonably probable use of vacant
    land or an improved property, which is legally
    permissible, physically possible, financially
    feasible, and results in the highest value
    (maximally productive).
  • Highest Best Use is a fundamental concept in
    real estate appraisal
  • it reflects a basic assumption about real estate
    market behavior - that the price a buyer will pay
    for a property is based on his conclusions about
    the most profitable use of the site or property

Feb 14, 2001
One Team - One Corps - One Fight
16
The Valuation Process
  • defined as A systematic procedure employed to
    provide the answer to a clients question about
    real property value.
  • The appraisal assignment employs / requires the
    appraiser to act as a disinterested third party.

Feb 14, 2001
One Team - One Corps - One Fight
17
The Valuation Process
Definition of the Problem
Identification of real estate
Identification of property rights to be valued
Use of appraisal
Definition of value
Date of value estimate
Description of scope of appraisal
Other limiting conditions
Preliminary Analysis and Data Selection and
Collection
General (Region, city neighborhood) Social Econo
mic Governmental Environmental
Specific (Subject comparables) Site
improvement Cost depreciation Income/expense
capitalization rate History of ownership use of
property
Competitive Supply Demand (The subject
market) Inventory of competitive properties Sales
listings Vacancies offerings Absorption
rates Demand studies
Highest and Best Use Analysis
Land as though vacant Property as
improved Specified in terms of use, time and
market participants
Land Value Estimate
Application of the Three Approaches
Sales (lease) comparison
Cost Income capitalization
Reconciliation of Value Indications and Final
Value Estimate
Report of Defined Value
18
The Valuation Process
Definition of the Problem
Identification of real estate
Identification of property rights to be valued
Use of appraisal
Definition of value
Description of scope of appraisal
Other limiting conditions
Date of value estimate
Feb 14, 2001
19
The Valuation Process
Preliminary Analysis and Data Selection and
Collection
General (Region, city neighborhood) Social Econo
mic Governmental Environmental
Specific (Subject comparables) Site
improvement Cost depreciation Income/expense
capitalization rate History of ownership use of
property
Competitive Supply Demand (The subject
market) Inventory of competitive properties Sales
listings Vacancies offerings Absorption
rates Demand studies

Feb 14, 2001
20
The Valuation Process
Highest and Best Use Analysis
Land as though vacant Property as
improved Specified in terms of use, time and
market participants
Land Value Estimate

Feb 14, 2001
21
The Valuation Process
Application of the Three Approaches
Sales (lease) comparison Cost Income
capitalization
Feb 14, 2001
22
Elements of Comparison
  • Property rights conveyed
  • Financing terms
  • Conditions of sale (motivation)
  • Date of sale
  • Location
  • Physical characteristics
  • Income producing characteristics
  • Zoning
  • Access

Feb 14, 2001
One Team - One Corps - One Fight
23
The Valuation Process
Reconciliation of Value Indications and Final
Value Estimate
Report of Defined Value
Feb 14, 2001
24
The Appraisal ReportReport of defined value
  • Function of an appraisal report - to lead the
    reader from the definition of an appraisal
    problem to a specific conclusion, through
    reasoning and relevant descriptive and supportive
    data
  • Importance -
  • only product of the appraisers work received by
    the client
  • may be read by third parties
  • may be needed for months or years after
    completion
  • Basis of the appraisers reputation
  • needs professional appearance, quality built-in
  • clear and meaningful photos, maps, exhibits

Feb 14, 2001
One Team - One Corps - One Fight
25
Types of Reports
  • Reconnaissance Scope Estimate - NOT an
    appraisal
  • Recon
  • Ballpark estimate
  • Screening level estimate
  • Gross Appraisal
  • Abbreviated or Brief
  • Standard, full or complete

Feb 14, 2001
One Team - One Corps - One Fight
26
Types of Reports (continued)
  • Tract Appraisal
  • Informal value estimates
  • Form reports
  • Brief appraisals
  • Narrative report format (detailed)
  • Complete appraisal, self-contained report
  • Limited appraisal, self-contained report
  • Complete or Limited , summary report
  • Complete or Limited, restricted report

Feb 14, 2001
One Team - One Corps - One Fight
27
What Can We Do Better?
  • Be a TEAM PLAYER
  • Early involvement
  • Ask questions to facilitate assignments.
  • Share lessons learned.
  • Timely actions and response
  • Utilize technology to our advantage.
  • Conference calls
  • E-mail and video teleconferencing (VTC)
  • Electronic preparation and transfer of documents
  • Provide appropriate training
  • Marriage of Gross Appraisal Real Estate Plan

Feb 14, 2001
Needs Attention!
28
WRAP - UP
  • Comments
  • Questions
  • Suggestions

Feb 14, 2001
One Team - One Corps - One Fight
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