Part 1 The Valuation Process Flashcards
A systematic set of procedures an appraiser follows to provide answers to a client’s questions about real property values.
Valuation process
The steps of the valuation process include
- Identification of the problem (also referred to as Definition of the problem)
- Scope of Work
- Data collection and property description
- Data analysis
- Land value opinion
- Application of the three approaches.
- Reconciliation
- Report of defined value
Identification of the problem includes
- Identify client and intended users
- Identify the intended use
- Identify the purpose of the assignment (type and definition of value)
- Identify the effective date of the opinion
- Identify the relevant characteristics of the property
- Identify assignment conditions
Step 3 (valuation process)
Data collection and property description
includes
- Market Area Data
- Subject Property Data
- Comparable Property Data
Step 4 Data Analysis
includes
Market Analysis
Highest and Best Use Analysis
Step 6 Application of the Approaches to Value
Sales Comparison Approach
Income Capitalization Approach
Cost Approach
The valuation process begins when the appraiser agrees to perform an assignment and ends______
when the conclusions are reported to the client.
The number of steps employed in the valuation process will depend on_____-
the nature of the appraisal assignment and available data.
The valuation process is ideally suited for_______
market value opinions
What is the blueprint used in forming an opinion of market value, as well as other types of value.
The valuation process
What is the first step in the valuation process?
To identify the client’s problem
What two steps are an exercise in judgment designed to produce credible assignment results?
Identify the client’s problem
Scope of work decision
Once the assignment’s scope of work is determined, the remaining steps are
an exercise in execution.
The party or parties, who engage an appraiser by employment or contract
The client
The CLIENT and any other party as identified, by name or type, as users of the appraisal, based on communication with the client at the time of the assignment
intended user
Who determines who the client is?
The appraiser
If the client wishes to remain anonymous,
they must still be identified in the work file. Parties other tan the client can actually pay for the appraiser, but this does not make them an intended user.
Intended users must
be identified by the appraiser in the appraisal report.
An appropriate scope of work decision is driven by
intended use.
Intended use is identified by the appraiser (when)______
prior to accepting the assignment
If the intended use changes the scope of work,
the opinion and conclusions developed might also change.
Identifying the purpose is the same as identifying the
type and definition of value
The objective of an assignment__e.g., to develop an opinion of the defined value of a specified interest in real estate.
Purpose of an assignment
The appraiser should also cite the source of the value definition.
The purpose of an appraisal is usually to____
develop an opinion of a certain type of value.
Market value
Use Value
Investment value
insured value
The appraiser must provide a statement of defined value to be developed in the assignment.
True or False
True
The value defined in the appraisal must address whether the opinion is reported in terms of cash, cash equivalency, or other precisely defined terms.
True or False
True
In what terms can the defined value be reported?
- Terms of cash
- Cash equivalency
- other precisely defined terms
An opinion of value is valid for_____
only for the exact date specified.
Professional standards require the appraiser to state at least two dates in each appraisal report:_____
- the effective date of the appraisal (appraisers often use the inspection date)
- the date of the report (usually the date the report is signed)
The appraiser must specify the date of the value opinion. This is because
the forces that influence value are subject to change
The effective date is contemporaneous with the date of the report.
Current
Features that may affect a property
s value or marketability such as legal, economic, or physical characteristics.
Relevant characteristics
Attributes of a property that are observable or measurable as a matter of fact, as distinguished from opinions and conclusions, which are the result of some level of analysis or judgment.
Physical characteristics
Examples of relevant property Characteristics include:
Location and physical, legal, and economic attributes
Real property interest to be valued, fee simple, leased fee, leasehold interest, partial interest
Personal property that is included in the appraisal
easements, encumbrances, leases, contracts
What are examples of assignment conditions?
Extraordinary assumption
Special assumptions
Hypothetical condition
Other assignment conditions
Market data is general data bout what four forces?
Economic
Environmental
social
governmental
Market area data includes information about:
population climate topography employment interest rates building codes zoning
Market area data focuses on
trends
Data that relates to the four forces that affect real property values
General Data
Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics
Specific Data
Market area data falls into the category of
General data
and focuses on trends that are affected by the four forces that influence value.
A series of related changes brought about by a chain of causes and effects
Trend
A _____ is a momentum or tendency in a general direction brought about by a series of interrelated changes.
Trend
Market area trends analyzed as general data can include:
population shifts
declining office building occupancy rates
increased housing starts
Comparable property data can be
general data or
specific data
The study of the supply and demand in a specific area for a specific type of property
Market analysis
The reasonably probable use of property that results in the highest value.
Highest and best use
The 4 criteria that the highest and best use must meet are:
legal permissibility
physical possibility
financial feasibility
maximum productivity
Comparable properties that do not have the same highest and best use as the subject property are______
usually eliminated from further analysis
Highest and best use conclusions should specify the following criterisa:
a. Use
b. Timing for the use
c. Typical market participants for the use
Highest and best use as improved (A two-step process)
.
If the property is improved, the appraiser must reach two separate conclusions of highest and best use. What are they?
H&BU of the site as though vacant
H&BU as improved.
Potential conclusions for the highest and best use of a property as improved include the following:
Continue in use as is
Modify the improvements through renovation or conversion to another use.
Demolish the improvements
A tax appeal assignment will commonly involve a ______effective date.
retrospective.
Intended use affects both appraisal ______ and reporteding.
devlopment
A systematic procedure appraisers can employ to provide the answer to a client’s question about the value of a property is called the
valuation process
In ___________analysis, the appraiser analyzes the idea improvement for the property.
highest and best use.
The relevant characteristics of a property are part of _________the problem.
identifying the problem
Identifying characteristics of the subject property is specific data rather than general data.
true
Developing an opinion of insurable value can be identified as the purpose of an appraisal assignment.
true
