Chapter 22 Direct Comparison And Cost Approach Flashcards
Types of depreciation
Curable: PHYSICAL easy to fix! Cheap (paint) FUNCTIONAL bathroom fixtures
Incurable: PHYSICAL can’t be fixed economically (slopping floors) FUNCTIONAL floor plan
RECENT definition
🔵Refers to the time period where supply and demand conditions in the market are relatively stable or do not change.
🔵immediatelt preceding the appraisal date, during which the property values of the region have remained stable.
Price Indices
🔵can be used to adjust price of non-recent sale price to appropriate level of value at the appraisal date.
🔵index can only be developed satisfactorily for homogenous commodities and whose values are easily determined.
🔵the definition of recent relies on the appraiser’s knowledge of the market in which he is appraising and prices indices should NOT BE USED.
Specific items of the properties to consider:
🔵building characteristics
( size of the structure, floor plan, # of rooms) architectural design does not appear to significantly affect purchaser’s decisions
🔵lot characteristics
🔵title and conditions of sale
Similar
Two properties are similar if the actual differences will not have a material effect on the selling price
Subject property
Is the standard of comparison and each comparable sale is adjusted towards it
Condominiums
Fee simple ownership
Tenancy in common areas of the development (common ownership)
Two important categories when appraising condominiums
Benefits and charges
“Are the benefits included in the common area charges similar for the units as comparables?”
“Is the methos of allocating and financing common area charges similar for the units used as comparables?”
Subdivided and service lots are at their highest and best use and may be valued using the comparative approach.
Lots are ready for the house-builder
Comparative approach is most suited
Single family detached houses
Condominiums
Owner occupied
COST APPROACH
Site Value \+improvements -depreciation ———————- MARKET VALUE
Determining the market value by the COST APPROACH
Site value
Improvements
Historic cost - cost incurred when the building was erected
IRRELEVANT
Current cost - the cost of doing the same construction at the date of appraisal
ALWAYS USED
Reproduction
Exact replica
Replacement
Modern equivalent
