Valuation of Real Property
Comparative Unit or Square Foot Method
Based on average cost per square foot for the area. Most commonly used method.
Functional Depreciation
loss in value due to the development of new technology or design, and is an inadequacy or a lack of functional utility, or superadequacy, due to overbuilding or overdesign.- sometimes curable
Curable Depreciation
type of depreciation in which the amount of money spent on repairing the deficiency is equal to or less than the resulting increase in value.
Incurable Depreciation
type of depreciation in which the amount of money spent on repairing the deficiency is more than the resulting increase in value.
Market Cost
refers to the past outlay of sufficient capital for the supervision, land, materials, labor and other valuables that are needed to bring an improvement into existence. This includes financing and the expenses incurred in selling the piece of property. - always refers to the past
Physical Depreciation
the loss in value due to such factors as wear and tear from use, structural defects, and exposure to the elements.- always "curable"
External Depreciation
loss in value caused by unfavorable economic influences occurring outside the property. It can be due to location or to economic factors.- never curable
What are the 6 steps in the appraisal process?
1. Defining the Problem 2. Conducting the Preliminary Survey 3. Gathering Data 4. Comparing, Analyzing and Classifying Data 5. Reconciliation - combining the results when using two or more of the approaches. 6. Issuing the Appraisal Report
what are the 5 steps in the sales comparison approach?
1. Find recent comparable sales and listings. 2. Verify data. 3. Select relevant units of comparison. 4. Compare to subject property and adjust for differences. 5. Reconcile into single value or range of values.
what are the elements of comparison and order of adjustments
1. Property rights conveyed 2. Financing terms 3. Conditions of sale 4. Market conditions 5. Location 6. Physical characteristics
Economic Life
A number which represents the time period over which a building or house will be usable if no maintenance is done
positive situs.
A property situated in an economically desirable location, that is, a location which allows it to successfully fulfill human needs, is said to benefit from
appraisal
An ___________ is an estimate or opinion of a property's nature, quality, value, or utility
four essential "determinants of value"
Demand Utility Scarcity Transferability
what is the formula for value of component?
Sale price of property with component - sale price without component
Market Value
The amount you could realistically sell an asset for today- always refers to the future amount or benefits that will be produced at some point in the future
Valuation
The process of determining the worth of something is called:
market price
The term that appraiser use to refer to the amount paid today for a property is
checksheet
The type of appraisal report most commonly used for residential properties is the:
Cubic Foot Method:
This method is based on an average cost per cubic foot. This method would be used for a structure with unusually high ceilings, such as a warehouse, where square foot method would not be accurate.
COMPARATIVE MARKET ANALYSIS (CMA)
an help the salesperson determine a listing price for the seller, and is a comparison of the prices of properties recently sold, properties currently on the market, and properties that did not sell
The four agents of productivity are:
capital, management, labor, and land.
Reproduction cost
cost at current prices to produce an exact duplicate.
Replacement Cost
cost at current prices to replace a building with one of equivalent utility
market analysis
informal estimate of value utilizing some or perhaps all of the techniques employed by the professional appraiser
unit-in-place method
method assigns an average cost for each unit, such as a bathroom, kitchen, bedroom, etc.
Quantity Survey Method
method calculates the total cost for every single item that must be purchased to build the structure, plus labor costs and indirect costs. This method is the most accurate and the most time consuming and the most expensive. This method might be used for a custom built home or the first house in a subdivision.
Income approach
method of estimating value would be used to determine the value of a residential lot
Cost Approach
technique of estimating the value of the subject property by adding the depreciated replacement cost or reproduction cost of the improvements to the value of the land, if vacant.-specially valuable when a lack of market activity limits the reliability of the sales comparison approach.- can NOT use to value land
market price
the amount that is actually paid, or is about to be paid, for a property's ownership rights at a specific point in time.- always refers to the present
valuation
the process of determining how much a piece of real property is worth
Sales Comparison Approach
the technique of estimating the value of real estate by analyzing and comparing data of actual sales of similar, or comparable properties. Each comparable sale is adjusted to the subject property by making dollar value allowances for each significant difference. This approach is based on the principle of substitution, which indicates that the value of the subject property is relative to the cost of acquiring an existing property with similar utility.
Situs
the term used to describe the sum of all economic aspects of a location which invest it with economic value.
