Real Estate Appraisal - Session 1
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What are the three approaches to value?
- direct comparison approach
- cost approach
- income approach
What do appraisers do?
- estimate values
- consult on real estate matters
- act as expert court witnesses
- review Appraisal Reports
What are the 4 forces that affect value?
What defines Real Estate?
Real Estate is the physical elements of a property like the land and the buildings
What defines Real Property?
Real property is the 'rights' that go along with a property. The rights to do things with a property and the rights that you can't do with a property
What defines Personal Property?
Things that we don't appraise, like your computer desk. Things that are unattached property items.
What are four characteristics of land/site?
- Immobility - virtually a fixed amount, seldom increased or decreased
- Development - can increase or decrease the density which can affect its value
- Durability - land mostly lasts forever, its value does not
- Divisibility of Ownership - land can be divided physically or legally
What is Objective Value?
It is based solely on the 'cost' to build which includes all costs and profits. It is easy to measure and calculate.
What is Subjective Value?
It is based on what the market will pay for an item. The value is in the mind of the Buyers and Sellers. It is what they perceive what it is worth to them.
True or False, Price, Cost, and Value are not the same.
Remember price is what you pay and value is what you buy.
What are the four factors of value? What are the two subgroups?
Supply Factors: Utility and Scarcity
Demand Factors: Desire and Effective Purchasing Power
***What is Market Value and how is it defined?***
- 1. Most probable price
- 2. As per a specific date
- 3. Cash or equivalent in local currency
- 4. Competitive Market
- 5. Buyer and Seller acting knowledgeably
- 6. No undue stress involved
What are three Ownership Rights of Real Property?
- 1. Bundle of Rights: give away, lease, mortgage, sell, refuse to do anything
- 2. Public Limitations: policing powers, expropriation, taxation, escheat
- 3. Private Limitations: voluntary or involuntary
What are the 5 steps of the valuation process?
- 1. Define the problem - what does the client require
- 2. Scope of the investigation determines search for data
- 3. Data collection process and its cataloguing
- 4. Analysis of the collected data
- 5. Apply the 3 approaches to data collected to arrive at an estimated value
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