Sales Comparison Approach
Effective Date of Value
1. Current Date 2. Retrospective 3. Prospective
Life Cycle of Market Area
1. Growth 2. Stability 3. Decline 4. Revitalization
Sales Comparison Approach
1. ID elements of comparison that effect value 2. Compare attributes of each comparable sale with subject 3. Measure the difference in contributory value for each element of comparison 4. Derive a net adjustment for each comparable 5. Apply net adjustment to sale or unit price of comparable 6. Reconcile range of adjusted total property or unit prices to subject property
The Valuation Process
1. Identification of the Problem 2. Scope of Work Determination 3. Data Collection & Property Description 4. Data Analysis 5.Land Value Opinion 6. Application of the Approaches to Value 7. Reconciliation 8. Report of Defined Value
Quantitative Techniques
1. Paired Data Analysis 2. Grouped Data Analysis 3. Secondary Data Analysis 4. Statistical Analysis
Measures of Variation or Dispersion
1. Range 2. Average Deviation 3. Standard Deviation
true
A building that is not the ideal improvement may still contribute to value.
Hypothetical Condition
A condition that is presumed to be true when it is known to be false.
Quantitative Adjustment
A numerical (dollar or percentage) adjustment to the indicated value of a comparable property to account for the effect of a difference between two properties on value.
Seller, Buyer
A party to a transaction generally can be the _________, ___________, or an agent for one of the two.
Decline
A period of diminishing demand.
Stability
A period of equilibrium without marked gains or losses.
Revitalization
A period of renewal, redevelopment, modernization, and increasing demand.
Growth
A period of time in which the market area gains public favor and acceptance.
Reconciliation
A phase of a valuation assignment in which two or more value indications are processed into a value opinion, which may be a range value, a single point estimate, or a reference to a benchmark value.
Sales Comparison Approach
A set of procedures in which a value indication is derived by comparing similar properties that have been sold recently to the property being appraised, making adjustments to the sale prices of the comparables based on the elements of the comparison, and applying appropriate units of comparison.
Standard Deviation
A statistical measure of the extent of absolute dispersion, variability, or scatter in a frequency distribution; obtained by extraction the square root of the arithmetic mean of the squares of the deviations from the arithmetic mean of the frequency distribution.
Valuation Process
A systematic set of procedures an appraiser follows to provide answers to a client's questions about real property value.
Interim Use
A temporary use to which a site or an improved property is put until it is ready to be put to its future highest and best use.
Legally Nonconforming Use
A use that was lawfully established and maintained, but no longer conforms to current zoning.
Legally, nonconforming use
A use that was lawfully established and maintained, but no longer conforms to the use regulations of its current zoning.
Retrospective Value Opinion
A value of opinion effective as of a specified historical date.
Prospective Opinion of Value
A value opinion effective as of a specified future date.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat.
Credible
An appraiser must disclose the research and analyses necessary to produce __________assignment results.
Financing Terms
An example of an element of comparison.
Price Per Boat Slip
An example of unit of comparison.
Intended Use
Based on communication with the client at the time of assignment.
Real Property Rights Conveyed The contract rent is $10,000 above market rent. The lease has 8 more years to run. The value indication from a comparable property sale of a fee simple estate is $550,000. What is the dollar amount of the adjustment to the sale for real property rights conveyed if the discount rate for the leasehold is 11%.
Clear calculator: f reg Enter # of periods: 8 n Enter annual discount rate: 11 i Enter annual rent premium: $10,000 chs pmt Calculate present value: pv $51,461
Evidence & Logic
Credible assignment results require support by relevant __________ and ___________.
Quantitative Data
Data in the form of numbers.
Qualitative Data
Data that is based on subjective measures, where the data tends to fall into nominal or ordinal categories; usually represented in the form of words.
General Data
Data that relates to the four forces that affect real property values - social, economic, governmental, and environmental forces. This type of data is usually not specific to any particular property but is applicable in many assignments of similar types of properties.
Specific Data
Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics.
Assignment Conditions
Extraordinary Assumptions, Hypothetical Conditions
Data search parameters are determined by the amount of the appraisal fee?
False
Identifying any known easements or restrictions is considered an assignment condition?
False
The client is the party or parties who pay the appraisal fee?
False
Identification of the Problem
Identify: client, intended users, intended use, purpose, effective date, relevant characteristics of property & assignment conditions
Linear Regression
In quantitative analysis, a function that uses one independent variable to reflect a relationship that changes on a straight-line basis.
Verification
In valuation practice, the process of validating or establishing the truth about information from another source, which is critical to credible assignment results. A valuer or reviewer may confirm information directly with a party knowledgeable about the property or transaction involving the property or with another credible source to determine the reliability of that information for use in the assignment.
Confidential
Information provided by your client is not necessarily _________________.
Directly Acquired
Information that flows from a party to the transaction to you.
Indirectly Acquired
Information that flows, through an intermediary. ie another appraiser, researcher, data service
Learned
Information that you did not know or suspect before communicating with a party to the transaction.
Validated
Information that you were aware of or suspected before communicating with a party to the transaction.
Data Analysis
Market Analysis: demand, supply & marketability studies Highest & Best Use Analysis: Land as though vacant, ideal improvement, property as improved
Data Collection & Property Description
Market Area Data: general characteristics of region, city & neighborhood Subject Property Data: characteristics of land use & improvements, personal property, business assets, etc Comparable Property Data: Sales, listings, offerings, vacancies, cost & depreciation, income & expense, cap rates, etc.
Adjustments
Mathematical changes made to market data to facilitate comparison or understanding.
Three common statistical measures....
Mean, Median & Mode
Standard Deviation (Calculator)
Number ∑ +, Number ∑ +, Number ∑ +.... g ¯X (mean is displayed) {line is over X} g s (Standard deviation is displayed)
Ideal Improvement
One that represents the highest and best use of a site as though vacant.
What principle holds that the value of a property tends to be set by the price that would be paid to acquire a property having similar utility and desirability within a reasonable amount of time.
Principle of Substitution
Contributory Value of Improvements
Property value - Vacant site Value
Environmental
Social, economic, governmental, and ________ forces affect an area's property values.
Quantitative Techniques
Techniques used to derive quantitative adjustments to comparable sale prices in the sales comparison approach.
Extraordinary Assumption
The appraiser believes to be true at the time of inspection, but if found to be false, could alter the appraiser's opinions or conclusions.
Elements of Comparison
The characteristics or attributes of properties and transactions that cause the prices of real estate to vary.
Elements of Comparison
The characteristics or attributes of properties and transactions that cause the prices of real property to vary.
Units of Comparison
The components into which a property may be divided for purposes of comparison...ie price per sq foot, front foot, cubic foot room, bed, seat, apartment, unit
Consistent Use
The concept that land cannot be valued on the basis of one use while improvements re valued on the basis of another use; most often an issue for interim or transitional uses of land.
Reconciliation Criteria
The criteria that enable an appraiser to form a meaningful, defensible conclusion about the final value of opinion. Value indications are tested for the appropriateness of the approaches and adjustments applied, the accuracy of the data, and the quality and quantity of evidence analyzed.
Range
The difference between the highest and lowest values in a set of numbers.
Adjusted Sale Price
The figure produced when the transaction price of a comparable sale is adjusted for elements of comparison in the valuation process.
Market Area
The geographic region from which a majority of demand comes and in which the majority of competition is located. It may be further subdivided into components such as primary, secondary, and tertiary.
Market Analysis
The identification and study of the market for a particular economic good or service.
Ideal Improvement
The improvement that takes maximum advantage of a site's potential given market demand, conforms to current market standards and the character of the market area, and contains the most suitably priced components; the improvement that represents the highest and best use of the land as though vacant.
Mode
The most frequent, or typical, value in an array of numbers; a position that is not affected by extreme values. It is the most descriptive average & easily identified when the number of items is small; if the sample is too small, however, none of the vales may be repeated & no mode exists. If two variates occuer with equal frequency, both are modes & the sample is said to be bimodal.
Average Deviation
The number obtained by subtracting the arithmetic mean of all the items from each item, adding up these differences without regard to sign, and dividing this sum by the number of items.
Leased Fee Interest
The ownership interest held by the lessor (owner), which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.
Client
The person or party who engages an appraiser.
Comparative Analysis
The process by which a value indication is derived in the sales comparison approach. It may employ quantitative or qualitative techniques, either separately or in combination.
Qualitative Analysis
The process of accounting for differences (such as between comparable properties and the subject property) that are not quantified.
Qualitative Analysis
The process of accounting for differences (such as between comparable properties and the subject property) that are not quantifies; may be combined with quantitative techniques.
Qualitative Analysis
The process of accounting for differences between comparables and the subject property that are not quantified.
Quantitative Analysis
The process of accounting for differences between comparables that are quantified.
Coefficient of Variation
The ratio of a measure of absolute dispersion to the appropriate average, usually expressed as a percentage; computed from either the quartile or the mean deviation, but usually expressed as a ratio of the standard deviation to the mean. Standard Deviation / Mean
Highest and Best Use
The reasonably probable use of property that results in the highest value. The four criteria that must be met are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
Leasehold Interest
The right held be the leasee (tenant) to use and occupy real estate for a stated term and under the conditions specified in the lease.
Variate
The specific value of a variable; generally called a variable. One item in a population.
Market Analysis
The study of the supply and demand in a specific area for a specific type of property.
Mean
The sum of the values of a set divided by the number of values. Commonly called the average. Most commonly used measure.
Interim Use
The temporary use to which a site or improved property is put until a different use becomes maximally productive.
Median
The value of the middle item in an uneven number of items arranged or arrayed according to size or the arithmetic average of the two central items in an even number of items arranged; a positional average that is not affected by the size of extreme values. MD = (n+1)/2 n=number of variates To find the median, the variates are arranged in numerical order. If the total number is odd the median is the middle variate. If the total number is even, the median is the the average of the two middle variates.
Verify
To establish the truth, accuracy or reality of.
Confirm
To give new assurance of the validity of; remove doubt about by authoritative act or indisputable act.
Building size is considered a relevant property characteristic?
True
The mean is affected by the size of extreme values.
True
The range does not lend itself to further statistical analysis.
True
The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant?
True
Current Date of Value
Typically, the date of the last inspection.
Land can be valued on the basis of one use while improvements can be valued on the basis of another.
false
A unit of comparison allows the appraiser to analyze the comparable sales in the manner used by
market participants
The sum of the values of a set divided by the number of values is called the
mean
A positional average that is not affected by the number of values is called the
median
The most frequent or typical value in an array of numbers is called the
mode
Data search parameters are determined by ______ & ________ of real property being valued.
nature & type
Property Characteristics
physical location, legal description, fee simple, leased fee, leasehold, personal property, trade fixtures, easements, special assessments...
The difference between the smallest and largest sample observation in a statistical distribution is called the
range
Construction costs are an example of specific data.
true