Lesson 1 Bus330 Flashcards
first principles of value
problem identification, property content, legal considerations, highest and best use, research, economic analysis,
professional competencies
analytical thinking, conceptual thinking, decisiveness, focus on quality and details, client service orientation
real estate
physical assets, like land and buildings
real property
the legal rights that attach to land, real property cannot be touched, but can be appraised and sold
real property example
lease or easement
bundle of rights
the packaging of all the rights of ownership attributable to a property
key characteristics of improved land
unique, immobile, durable, of finite supply, and usefulness
characteristics of real property
immobility, durability of improved land, indivisibility of services, divisibility of owership
immobility
transactions in one market area have little impact on transactions in another area but not isolated from national economic conditions, or legislative changes
industrial areas grow around
waterfront or railways
value of land is directly related to its
use
economic factors
interest rates, taxes, foreign investment, and political changes
production of all goods and services including real estate, depends upon the combined effects of four economic ingredients: known ad the agents of production
land
labour
capital
entrepreneurial profit
factors of value
supply: utility and scarcity,
demand: desire, effective purchasing power
market determines what the value is
worth
principles impacting real property value
anticipation and change
supply and demand
substitution, balance, surplus productivity, contribution, conformity, externalities
appraisal is largely about attempting to see a property through the eyes of
market participants
anticipation and change
present worth of future benefits
real estate markets change constantly
substitution
this principle stats that a buyer will not pay more for a property than for another that is equally desirable
basis for the three traditional approaches to value
approaches to value and principle of substitution
direct comparison
cost
income
principle of balance
previous sale may satisfy demand at that price level and prices may begin to drop or stabilize
surplus productivity
land value is based on the difference between market value and the cost to create a given real estate property
contribution
knowledge of the market determines how much certain items contribute to the value of the property. a kitchen remodel could cost 50K and could reflect 75K or 25K in the market
conformity
values are maximized when a property characteristics conform to market demand
externalities
good and bad
highest and best use
land meets its economic potential, if the building burned down, would the same on be constructed
land value opinon
property value as a combined value of land and improvements as this is how real estate market participants tend to view market value
application of the approaches to value
apply 1 approach
DCA
no more or less than the sale prices of similar properties
most common for vacant land, simple commercial
good reliable sales data exists
expired listings determine price ceilings
income approach
determine applicable rents, vacancy rates, collection losses, operating expenses, and capitalization or yield rates
cost approach
purchaser should be willing to pay no more for a new property than the cost of buying a similar parcel of land and constructing a new building.
useful for really new or old, or unique buildings
