Introduction and Part 1 Flashcards
The Valuation Process
A systematic set of procedures an appraiser follows to provide answers to a client’s questions about real property value best defines what?
The valuation process.
- Identify the client and intended users
- Identify the intended use
- Identify the type and definition of value
- Identify the effective date of the opinion
- Identify the relevant characteristics of the property
- Identify any assignment conditions (such as extraordinary assumptions, hypothetical conditions, jurisdictional exceptions and laws and regulations that may apply to the assignment)
These are the six assignment elements for which step in the valuation process?
Identification of the problem.
Step 1 of the valuation process
“The party or parties (i.e., individual, group, or entity) who engage
an appraiser by employment or contract in a specific assignment, whether directly or through an agent” (USPAP, Definitions) defines which assignment of identification of the problem?
Client
Assignment 1 of identification of the client’s problem
Step 1: Identification of the problem
“The client and any other party as identified, by name or type,
as users of the appraisal or appraisal review report by the appraiser, based on communication with the client at the time of the assignment” (USPAP,
Definitions) defines which assignment of identification of the problem?
If a bank engages the appraiser, the bank is the client and ________ ________ of the appraisal. The borrower may pay the appraiser’s fee as part of their closing costs, and the borrower may receive a copy of the appraiser’s report, but this does not make them an ________ ________.
Intended user
Assignment 1 of Identifying of the client’s probelm
Step 1: Identification of the problem
“The use(s) of an appraiser’s reported appraisal or appraisal review assignment results, as identified by the appraiser based on communication with the client at the time of the assignment.” (USPAP, Definitions)
Intended use
Assignment 2 of Identifying of the client’s probelm
Step 1: Identification of the problem
The objective of an assignment—e.g., in an appraisal assignment, to develop an opinion of the defined value of a specified interest in real estate. Identifying the purpose is the same as identifying the ____ and ____of ____ to be developed.
Type and definition of value
Assignment 3 of Identifying the client’s probelm
Step 1: Identification of the problem
the date of the value opinion, and it may be a past (retrospective), present (current), or future (prospective) date depending on the intended use and the intended users of the appraisal, i.e., also referred to as the date of value.
Effective date of the opinion
Assignment 4 of Identifying the client’s probelm
Step 1: Identification of the problem
“Features that may affect a property’s value or marketability such as legal, economic, or physical characteristics.” (USPAP, Definitions)
Relevant characteristics
Assignment 5 of Identifying of the client’s probelm
Step 1: Identification of the problem
- Extraordinary assumption/Special assumption
- Hypothetical condition
- Other assignment conditions
These are the three possible ________ ________ to identify
assignment conditions
Assignment 6 of identification of the client’s probelm
Step 1: Identification of the problem
Step 1: Identification of the Problem
Step 2: Scope of Work Determination
Step 3: Data collection & Property Description
Step 4: Data analysis
Step 5: Land value opinion
Step 6: Application of the approaches to value
Step 7: Reconciliation of value indications and final opinion of value
Step 8: Report of defined value
Are the steps of what process?
Valuation process
- Market area data
- Subject property data
- Comparable property data
Are included in which step of the valuation process?
Step 3: Data collection & property description
Data that relates to the four forces that affect real property
values—social, economic, governmental, and environmental forces.
General Data
Step 3: Data collection & property description
Details about the property being appraised, comparable sales and rental properties, and relevant local market characteristics.
Specific data
Step 3: Data collection & property description
________ ________ ________ focuses on trends that are affected by the four forces that influence value - economic, environmental, social, and governmental.
Market Area Data
General Data
Step 3: Data collection & property description
A series of related changes brought about by a chain of causes and effects. ________ are forecast through economic base analysis, statistical analysis, market analysis, and analysis of economic indicators and surveys.
Trends
Step 3: Data collection & property description
Subject characteristics of land use and improvements, personal property, business assets, etc.
Subject property data
Specific Data
Step 3: Data collection & property description
_______ _______ _______ is when property sales, rentals, or operating expenses are used for comparison in the valuation process.
Comparable property data
General data or specific data
Step 3: Data collection & property description
The study of the supply and demand in a specific area for a specific type of property.
Market analysis
Step 4: Data Analysis
The reasonably probable use of property that results
in the highest value. The four criteria that the ___________ and ___________ use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Alternatively, the probable use of land or improved property— specific with respect to user and timing of the use—that is adequately supported and results in the highest present value.
Highest and best use analysis
Step 4: Data Analysis
“The type and extent of research and analyses in an appraisal or appraisal review assignment.” (USPAP, Definitions)
Scope of work
Step 2 of the valuation process
This is a condition that is contrary to what exists but is supposed for the purpose of analysis.
Hypothetical condition
Step 1: Identification of the problem
“An assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions.
Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions or trends; or the integrity of data used in an analysis.” (USPAP, Definitions)
Extraordinary assumption
Step 1: Identification of the problem
An assumption, directly applicable to a specific appraisal or review, which, if found to be false, could alter the opinions or conclusions in an appraisal or review. (SVP, Definitions)
Special assumption
Step 1: Identification of the problem
An appraiser has been hired to provide a valuation of a property that is known to have a contamination issue. To quantify the damage to the property, the appraiser will provide a value opinion as though the property is not contaminated for comparison purposes. What assignment condition should the appraiser use for this specific value opinion?
hypothetical condition
Which of the following would be an appropriate effective date of value for an appraisal assignment of an estate that went into probate 18 months ago?
retrospective valuation date
This was a quiz question.
There are valuation scenarios in which it may be permissible for an appraiser’s conclusion to be different given the same property and with the same effective date. Which of the following intended use scenarios should NOT be expected to have a significant difference in the value conclusion?
The first scenario is for a lender located in the subject’s geographic area and the second scenario is for a lender located in another part of the country.
These two scenarios should NOT have significant differences in the value conclusions. The intended use is likely to be the same for both scenarios.
In a market value assignment, when must an appraiser identify the intended users of the appraisal?
prior to accepting the assignment
All components/assignments of problem identification (Step 1) should be identified prior to accepting the assignment.
In which step of the valuation process does an appraiser analyze the ideal improvement for the appraised property?
data analysis—highest and best use
Highest and best use considers what type of improvement would be ideally suited to the property as though vacant.
While analyzing a property’s value, an appraiser observed that some sites in the immediate area of the subject have unstable soil conditions. The subject site shows no evidence of this issue, but no determination could be made at the present time. When completing the assignment, what assignment condition should the appraiser consider in order to address this issue?
extraordinary assumption
The unstable soils present a situation where the information about the condition is uncertain. If the assumption is proven false, the appraiser’s conclusions would be affected.
The intended use of an assignment guides an appraiser on the type and extent of research and analyses performed as one aspect of the valuation process. But intended use also guides the appraiser in what other aspect of the valuation process?
Intended use guides the report content and level of information provided.
I got this quiz question wrong and used the course handbook to find this answer.
Which two dates must be stated in the appraisal report?
the effective date and the report date
These two dates are required by professional standards in order to establish whether the appraisal report represents a retrospective, prospective, or current opinion.
