Card Set Information
Methods of Estimating Value/Appraisal
What is the most important step in appraisals?
To define the object being appraised
What are the three different types of data used for an appraisal?
General, Specific, and data for each of the appraisal approaches
What is general data?
The nation, region, state, city, and neighborhood
What is specific data?
Details of the subject property and any improvements to the property
What is Sales Comparison Approach
Grounded on the principle of substitution that states that consumers will pay no more for a property than other consumers have paid for comparable properties.
What is the cost approach to appraising?
Used to find the value of a new or special-purpose building, schools, churches, ect.
What are the 5 steps of a cost approach appraisal?
1. Estimate the value of the site as though vacant
2. Estimate the cost of improvements if new
3. Estimate the accruded depreciation
4. Subtract depreciation from improvements to get present value of the improvements
5. Add estimated value to results of step 4.
What are the two methods of determing the value of the subject building?
Reproduction and Replacement
What is Reproduction?
Cost of construction an exact replica
What is Replacement?
The cost on constructing a building having comparable utility or like use, using current standards or materials and design, and built at current prices
What is physical deterioration
Result of normal wear and tear inflicted on the property
What is functional obsolescence?
Loss of value attributed to outdated equipment, eccentric design, and/or social change
What is External Obsolescence?
Loss of value due to factors located outside of the subject property boundaries that leaves the property owner with no direct input to correct the obsolescence
What is the Income Approach?
Also the Capitalization Method, evaluates the present value of the income producing property based upon a flow of future benefits
Two steps to determining the Income Approach?
1.Estimate the Net Operating Income (NOI)
2. Convert the estimated NOI to a value by using the capitalization process (CAP RATE)
How to determine the NOI?
1. Estimate the annual potential gross income
2.Add other income laundry facilities, parking fees, ect
3. Subtract loss due to vacancy
4. Results in the projective effective gross income
5. Determine the expenses; payroll, utilities, management fees, ect.