Real Estate Appraisal 1 Flashcards
In what 2 ways is appraisal referred to?
1) The process by which an appraiser reaches certain conclusions
2) The written report that the conclusions are stated on
Define appraisal
An unbiased, knowledgeable, supported estimate or opinion of value
Why does the estimate of a value have to be documented?
If you tell someone a value that changes they can sue you
Typical assignments for appraisers
Refinance of loans Equity loans/secondary mortgage Real estate sales New construction Estate tax Gifts/donations Condemnation proceedings Divorce cases Tax assessment Property insurance
Four elements that create value
Demand
Utility- usable
Scarcity
Transferability- market
Physical/environmental influences
Tornado, hurricane
Transportation network
Economic influences
Unemployment
Interest rate changes
Stock market crashes
*More borrowing when lower interest rates
Government and legal influences
Zoning
Military bases
Tax incentives for industry
Social influences
Population growth
Baby boom
Living standards
Market value
Most probably sales price
Arms length
Values are between independent parties (not related)
How are values considered arms length?
Buyer and seller typically motivated
Both parties well informed and acting in best interests
Reasonable exposure time
Payment in cash or comparable
No affect on price by creative financing or sales concessions
Investment value
The value to you, not the value to the average buyer or seller (market value)
Assessed value
The value used for property taxes
Liquidation value
Quick-sale value for foreclosure
Book value
Used for estate tax
= cost - depreciation
Business value
Includes other than just real estate
-When would business value be market value? apartments-rent
Valuation of a site
Examining the use of the site and deciding which is best to find the max market value
(highest and best use)
What 2 ways is a property examined for highest and best use?
As improved
As if vacant
4 tests for highest and best use
Physically possible (fit) Legally permissible (zoning) Financially feasible (return) Maximally productive (use)
Property life cycle
Growth
Equilibrium
Decline
Revitalization
-Helps to get the final value
