Appraisal Flashcards
Flashcards
land residual method
“A method of estimating land value in which the net operating income attributable to the land is isolated and capitalized to produce an indication of the land’s contribution to the total property.”
should be used in the appraisal of income producing properties.
basic income capitalization formula
Value = Income/Rate
ground rent capitalization method
“A method of estimating land value; applied by capitalizing ground rent at a market-derived rate. This method is useful when comparable rents, rates, and factors can be developed from an analysis of sales of leased land or other market sources.”
formula of value
income divided by a rate
Relative comparison analysis
a less precise application of the sales comparison method, but it reflects the imperfect nature of real estate markets.
Ranking analysis
a variant of relative comparison analysis, in which the comparable sales are ranked in ascending or descending order. Then the relative position of the subject is determined within the array.
land
- In law, the solid surface on the earth, as distinguished from water.
- One of the four agents of production in economic theory”
Site
“Improved land or a lot in a finished state so that it is ready to be used for a specific purpose.”
Cost Approach
The cost approach is sometimes referred to as the summation approach, although this term is generally considered somewhat outdated. The cost approach deals with two components, site and improvements, which are added together (i.e., summed) to produce a value indication.
Brownfields
“Real property for which the expansion, redevelopment, or reuse of the real estate may be complicated by the presence of environmental contamination that needs to be remediated to appropriate regulatory standards.”
6 Site Valuation Methods
SALES COMPARISON - Comparison with recents ales
- EXTRACTION - Subtracts estimated improvement value to arrive at land value
- ALLOCATION - Uses land-to-value ratios based on improved sale comparables
- SUBDIVISION DEVELOPMENT - Subtracts estimated development costs from discounted sale proceeds
- LAND RESIDUAL - Divides up and capitalizes the income between land and improvements
- GROUND RENT CAPITALIZATION - Capitalizes income from leased land
Types of Adjustments
When utilizing sales comparison, adjustments to the comparable sales may be made either on a quantitative or qualitative basis. Quantitative adjustments are usually made on a percentage or dollar basis.
qualitative basis
Relative comparison analysis
Ranking analysis
Quantitative adjustments
Sales Comparison Extraction Method Allocation Method Subdivision Development Method Land Residual Method Ground Rent Capitalization Method
Extraction Method
A method of estimating land value in which the depreciated cost of the improvements on an improved property is calculated and deducted from the total sale price to arrive at an estimated sale price for the land.”
Allocation Method
“A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land value to total property value and this ratio is applied to the property being appraised or the comparable sale being analyzed.”
Mass appraisals
“1. The application of computer technology and statistical techniques to the solution of appraisal problems; used in assessment administration to derive value indications in the cost and sales comparison approaches and to perform other functions, e.g., assessment ratio analysis.
- A system of appraising property, usually only certain types of real property, that incorporates statistical analyses such as multiple regression analysis and adaptive estimation procedure to assist the appraiser in estimating value. (IAAO)”
Land Residual Method
“A method of estimating land value in which the net operating income attributable to the land is isolated and capitalized to produce an indication of the land’s contribution to the total property.”
five basic housing types
- Ranch - 1 story
- Cape Cod - 1-½ story
- Two-story
- Split level - multi levels
- Split entry (sometimes called a split foyer, bi-level, or raised ranch) - one story with finishedbasement (Note: Marshall & Swift refers to this type as a “two story bi-level”)
Style can be influenced by
- Type and texture of exterior finish
- Colors
- Roof style
- Roofing materials
- Window types
- Building shape
- Ornamental details
- Shutters
- Dormers
- Cupolas
- Corner boards
Types of Commercial Construction
- Class A - fireproofed steel frame
- Class B - reinforced concrete frame
- Class C - masonry or reinforced concrete
- Class D - wood or steel studs
- Class S - pre-engineered structural; members
Manufactured Home
“A factory-built house manufactured under the Federal Manufactured Home Construction and Safety Standards Act of 1976, commonly known as the HUD Code.”“A factory-built house manufactured under the Federal Manufactured Home Construction and Safety Standards Act of 1976, commonly known as the HUD Code.”
the manufactured home is constructed on a permanent steel chassis and has wheels and axles. It is meant to be hauled down the highway and arrives 100% finished. The sections are joined together at the site and it is complete. Most significantly, it is built to meet the HUD Code.
Modular Home
“A factory-built house built in compliance with a building code other than the HUD Code. This usually means that the home is constructed to the standards of the state or local building code used by the governmental unit where the house is to be located. Note that the California Factory-Built Housing Program uses the term factory-built housing (FBH) in place of the term modular home.”
built in sections, called boxes, which are lifted onto a truck and transported to the site. The boxes are lifted off with a crane, or rolled off, onto the foundation. Then the boxes have to be joined and finishing work performed at the site. A modular home is built to meet state and local codes, not the HUD Code.
Gross Living Area (GLA)
“Total area of finished, above-grade residential space; calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space. (Finished basements and attic areas are not generally included in total gross living area. Local practices, however, may differ).”
Gross Building Area
“Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above grade area. This includes mezzanines and basements if and when typically included in the market area of the type of property involved.”
GBA is used in measuring 2- to 4-unit residential properties. It is also sometimes used in measuring commercial buildings, such as office buildings. It may include some unfinished areas or common areas such as hallways.
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http://websoilsurvey.nrcs.usda.gov/app/
Soil maps
Site Preparation - Legal Considerations
- Obtain a building permit
- Check applicable codes
- Building Codes
- Fire Codes
- Check environmental regulations
- Wetlands
- Protected areas
- Hazard areas
- Check flood plain
- Curb cut permit or driveway permit (if needed)
3 components of the foundation system
- The soil bed
- Footings
- Foundation wall or piers
Foundation System 3 purposes
It distributes the weight of the building over the ground, anchors the building to the ground, and protects the wood in the house structure from decay and insect attack.
keyway
a slot that was created in the top of the footing when it was poured.
Sill Plates
usually 2 x 6 or 2 x 8 wooden boards,depending on the size of the foundation wall. Before they go down ontop the foundation wall, there should be an insulation strip or sillsealer installed.
first piece of the wooden structure
Girders
the main support beams and are set in pockets that were formed in the top of the end walls of the foundation
Joists
horizontal structural members, placed on edge, which carry the house loads to girders and sills. The thickness, width and spacing are determined by the live loads placed on them. They commonly are 2 x 10’s or 2 x 12’s.
Subflooring
Until the 1970s, subflooring usually consisted of 1” x 6” tongue and groove boards laid diagonally for more strength. Today it is almost always 4’ x 8’ sheets of plywood or oriented strand board (OSB). One-half inch may be an acceptable minimum, but 5/8 inch or 3/4 inch is much more desirable.
Framing Systems
For over a thousand years, the framing system utilized was the post and beam system. This consists of large vertical posts that support horizontal beams. The posts and beams were joined together by various interlocking joints, such as mortise and tenon, and then secured by wooden pegs.
Balloon Framing
Balloon framing was introduced around 1850 in America
good structural rigidity and was well suited for the plaster interior finishes of the day.
disadvantages were that the two story cavities between studs were dangerous in the event of a fire.
Due to fire hazard and code compliance issues (not to mention the difficulty of getting good lumber 20 feet long), balloon framing is rarely used today. It has been replaced by platform framing
Platform Framing
the studs run one story high. The wall sections are framed on the convenient “platform” consisting of the floor joists and subfloor. If there is a second floor, a whole new platform is erected on top of the walls. Then a second story is framed up with one-story studs. It also makes it more efficient to build as the second floor platform makes a perfect staging area to layout and frame the second-story walls - before they are erected.
Headers
built over the openings to spread the load out to the sides and prevent the windows and doors from getting crushed or sticking.
studs
mounted vertically and have a sole plate nailed across the bottom. If the studs are 2 x 4 boards, they are installed 16 inches on center; if 2 x 6 boards are used, then they are typically put 24 inches on center. With 2 x 6s there is a bigger wall cavity, so more insulation can be inserted.
Sheathing
applied to: •Strengthen the structure •Provide a nailing surface for siding •Combat air infiltration •Form a moisture barrier •Provide some insulation The most common sheathing is insulating foam sheathing, which can provide up to R-8 insulation. Plywood or OSB board is sometimes still used, particularly when strength and rigidity are required. Then sheathing paper, such as asphalt building paper, or vapor and wind barriers such as "Tyvek", are applied.
Stucco
a lime-based mortar finish applied to a wall. It can be easily applied over concrete blocks. Two or three coats are sprayed or troweled on.
Stucco can be applied over frame walls, with the proper preparation. Wire mesh is first attached to solid sheathing.
Exterior Insulation and Finish Systems (EIFS)/Synthetic Stucco
This is a combination of insulation and exterior finish in one process. The exterior surface is quite water resistant, but there have been many problems with water infiltration where they meet other components such as windows, doors, roofs and chimneys.
Five layers of EIFS
- Substrate
- Adhesive
- Insulation board
- Base coat with imbedded fiberglass mesh
- Finish coat in desired color
Masonry Construction Varieties
- Brick
- Stone
- Concrete block
- Poured concrete
Masonry Construction Varieties
It is sturdy, durable and low maintenance, but generally costs more than frame construction. Masonry construction has been around longer than frame construction.
Brick construction
may be solid brick, where the wall is laid in two layers with interlocking bricks. The bricks themselves can be laid in different patterns and come in many colors.
brick veneer,
a layer of brick over a frame wall. It may be applied to all four walls or maybe just the front facade.
thin bricks
A newer product consists of brick material that is only about an inch thick and is applied over a frame wall.
Roof Framing
As the weight of the roof presses down, it tries to push the side walls out. The various components of the framing system hold the walls together.
Conventional rafter systems
consist of boards that are set at an angle and meet at the ridge. There may or may not be additional cross pieces to help combat the stresses.
Roof truss systems
resist the spreading stresses and transfer all the weight to the outside walls. They are about three to four times as strong as a conventional rafter system, and none of the interior walls are load bearing. They are usually factory built to custom specifications, trucked to the site and erected with cranes.
Roof Slope
The slope of the roof is described as a precise relationship of the rise over run. The rise is how high it goes up vertically over a certain horizontal run. For example, if the roof rises 4 inches as it goes 12 inches sideways - the slope or pitch of the roof is 4 over 12 or 4/12.
Roof Covering
has the basic function of keeping out the rain and snow. It can also serve aesthetic purposes and adds texture and color to a house design.
list of popular roof coverings arranged in order of their costs - from low to high. (9)
- Composition roll roofing
- Composition shingle
- Built-up rock
- Metal
- Wood shakes or shingles
- Cement fiber shingle
- Clay tile
- Slate
- Copper
square (roofing materials)
100 square feet
Siding
Wood siding, both shingles and clapboard, was the standard in this country from the 1600s through the 1800s. In the last 50 years or so, there have been many innovations in lower maintenance siding materials. Many have the color baked in, and textures are available to resemble wood.
a list follows with sidings in approximate order of cost. (9)
- Hardboard
- Wood clapboard
- Aluminum
- Vinyl
- Stucco
- Wood shingles
- EIFS
- Brick
- Stone
fiber-cement siding
Fiber-cement siding is gaining rapid acceptance for both residential and non-residential new construction. Its features include: •Low maintenance •Moisture resistant •Won't crack, rot, buckle or de-laminate •Termite proof •Non-combustible •50-year transferable warranty
fiberglass composition shingles
The most common roofing material currently used in new construction in the U.S. is
HVAC Systems
Heating, Ventilating, and Air Conditioning.
conductors.
Some materials transfer energy more quickly
Good conductors include such things as metal and stone. If you sit on a stone bench, your backside gets cold because the stone quickly conducts away the body heat.
Poor conductors/insulators
include plastic and air. That’s why we move electricity through a copper wire encased in plastic. We can insulate a wall with cellulose fibers with lots of air spaces. Down parkas work well because of the air spaces in between the feathers. If they get damp or the down gets matted, it doesn’t insulate as well.
R factor
The measure of resistance to heat transfer.
To give some perspective - an inch of wood has an R factor of about 1
Ventilation Methods 7
- Attic fans
- Kitchen fans
- Vents - basement and crawl space
- Attic - ridge vents, perforated soffits
- Louvers
- Cupolas
- Mechanical air exchangers
Windows R Factors
A single pane of glass has an R factor of 0.5. Two panes, with an air space, make about R-1.5 and even triple panes with two air spaces have an R factor of only about 2.5. You might as well have a big hole in the wall, to let out all the hot air. If nothing else, you may want to have fewer windows on the north side and more on the south.
Low-E Glass
has a coating on the inside to reflect heat energy back inside.
Low - E glass advantages 3
- Better heat insulation
- Reduced carbon dioxide into the atmosphere
- Reduced condensation on the interior
Radiant heat advantages
- Doesn’t dry out the air
- No air or dust blown around
- No convectors or registers to complicate furniture arrangement
- Less heat loss to outside air infiltration
- Can reduce the heat load in a well insulated house by 25% to 35% over conventional convective systems
Electric Heat Pumps
simply reversible air conditioners. They can heatin the winter and cool in the summer. They use a refrigerant to pick up and discharge heat.
Heat pumps use very little energy and have few moving parts. The problem is that they are inefficient once the outside air gets below about 40 degrees. In northern climes, they need back-up systems for heating, but will work well for cooling. They are a relatively slow form of heat as the heated air entering a room is considerably cooler than that supplied by a hot air heating system.
Geothermal Heat Pumps
Geothermal systems usually employ high density polyethylene pipe. t is buried four to six feet deep for horizontal applications and ay run from 100 to 500 feet deep for vertical applications. The pipes are filled with water or a non-toxic antifreeze solution. According to the EPA, GeoExchange systems are the “most energy efficient, environmentally clean, and cost effective space conditioning systems available.”
A/C systems need to be properly sized for the building according to
- Building volume
- Window area
- Insulation R factors
- Appliance heat output
- Solar orientation
- Humidity levels in climate
(SEER)
Seasonal Energy Efficiency Rating label. Acceptable Minimum is 10 - maximum is 18.
Plumbing Systems
Plumbing systems encompass two main systems: the distribution system and the drain/waste/vent (DWV) system. In addition, there may be a third sub-system with hot water or solar heating.
distribution system
brings water, under pressure, into the house - usually through a ¾-inch or one-inch line. This divides before going through the water heater into cold and hot water distribution lines that run to each fixture or appliance. Better quality systems use ¾-inch main lines and ½-inch branch lines. Lesser quality installations use ½-inch throughout.
Good plumbing practice postulates:
- Keep piping runs as short as possible
- Put the water heater close to the main point of use
- Insulate supply pipes - both hot and cold
- In cold climates, do not run supply pipes in exterior walls and unheated areas
- Design the system so it can be shut down and drained easily
- Install shutoff valves on every fixture riser pipe
drainage system
carries off waste water. Grey water from the sinks and laundry are carried off in drain lines and may vary from 1-½ inches to 3 inches. Black water from the toilets is taken away by soil lines, which are usually 3-inch lines.
Piston pumps
use suction to lift the water.
Submersible pumps
are preferable. They go in the bottom of the well and push the water up. However, it is harder to maintain or repair them, as they have to be pulled up to the surface for servicing.
Electrical Systems
Voltage = Pressure
Amperage = Volume
Amperage
Amperage is the total amount of electricity that you have available.
Wiring 4 types
Knob and tube
BX or armored cable
Aluminum wiring
Romex
knob and tube wiring
The earliest type of wiring in a house consisted of bare copper wires strung between porcelain insulators or standoffs.
BX or armored cable wiring
There were two wires and a ground inside a metal jacket that protected the wires. It was a good system for interior wiring of a house, but the cable was hard to work with, hard to cut, and didn’t bend very well.
Aluminum wiring
used for a short period of time in the mid-50s, due to a shortage of copper during the Korean War. It proved to be a fire hazard, in many instances, as the aluminum was subject to oxidation where it joined the electric boxes and receptacles.
plastic coated or Romex
They are flexible, and give the wires adequate protection. Since the 1960s, the most popular wires
substitution
“The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based.”
Cost Approach Formula
Reproduction or Replacement Cost New
- Accrued Depreciation
+ Site Value
= Property Value
The four methods of estimating the reproduction/replacement cost of a structure
- Index method
- Comparative-unit method
- Unit-in-place method
- Quantity survey method
cost approach
“A set of procedures through which a value indication is derived for the fee simple estate by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive or profit, deducting depreciation from the total cost, and adding the estimated land value. Adjustments may then be made to the indicated value of the fee simple estate in the subject property to reflect the value of the property interest being appraised.”
