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Chapter 17 Real Estate Appraisal

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Real Estate Appraisal _____ Appraisal An estimate of value. Three approaches to estimating value: Market comparable sales data Cost ... – PowerPoint PPT presentation

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Title: Chapter 17 Real Estate Appraisal


1
Chapter 17 Real 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
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)
10
Direct Capitalization Using an Overall Rate
Income Overall Rate
Value
45,400 0.09376
200,000
11
cost recovery
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
138,000 Cost Approach 200,000 x 20
40,000 Income Approach 160,000 x 5
8,000 Final Indicated Value
186,000
14
Appraisal Regulations
  • THE APPRAISAL FOUNDATION
  • FEDERAL REGULATION
  • DEVELOPING THE APPRAISAL
  • APPRAISAL STANDARDS USPAP
  • APPRAISALS REQUIRED
  • REPORTING STANDARDS

15
Types of Appraisals and Reporting Options under
USPAP
Types of Appraisals
  • Complete appraisal
  • Limited appraisal

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

16
Formats of Appraisal Reports
  1. Letter report
  2. Form report
  3. Narrative report
  4. Review appraisals
  5. Real Estate Analysis

17
Appraiser License
  • Certified General Appraiser
  • Certified Residential Appraiser
  • State licensed appraiser
  • Provisional licensed real estate appraiser
  • Appraiser trainee

18
Texas appraiser licensing and certification board
requirements
19
Texas appraiser licensing and certification board
requirements
20
Texas appraiser licensing and certification board
requirements
21
Texas appraiser licensing and certification board
requirements
22
HIGHEST AND BEST USE
  • that use that will give the property its
    greatest current value!

23
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

24
Value
  • Market value
  • Assessed value
  • Insurance value
  • Loan value
  • Estate tax value
  • Plottage value
  • Rental value
  • Replacement value

25
Markets
  • Buyers market excess supply of housing for
    sale.
  • Sellers market demand exceeds supply.

26
Texas Regulations
  • TALCB www.talcb.state.tx.us
  • If you have not followed USPAP guidelines then
    include this statement
  • THIS IS AN OPINION OF VALUE OR COMPARATIVE MARKET
    ANALYSIS AND SHOULD NOT BE CONSIDERED AN
    APPRAISAL.
  • BROKERS PRICE OPINION
  • COMPARATIVE MARKET ANALYSIS

27
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
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