Unit 16 - 8 State - Appraisal Flashcards
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Appraiser Qualifications Board (AQB)
minimum criteria for state-certified appraisers
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Appraisal Standards Board (ASB)
develops, interprets, and demands Uniform Standards of Professional Appraisal Practice (USPAP)
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residential appraiser vs general appraiser
res = appraise 4 or fewer units general = any type of real property
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Rules for Sales Assoc to give Appraisal
- abide by USPAP
- not federally related transactions
- must not represent as certified appraiser
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Types of Value Appraiser may be hired to estimate
- Assessed Value (for taxes)
- Insurance Value (amount required to replace)
- Investment Value (price investor may pay)
- Liquidation Value (value associated with rapid sale)
- Going-conern Value (income-property known by history)
- Salvage Value (amount improvements could be sold at structure’s end of life)
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Market Value
most probable price property should bring in competitive and open market
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Characteristics of Value
DUST
Demand
Utility
Scarcity
Transferability
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principle of substitution
max value set by cost to substitute property or construct it
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Highest and Best Use
most profitable single use of property. Needs to be:
*ok with zoning
*physically possible
*financially possible
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assemblage and plottage
assemblage = put lots together plottage = added value
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progression vs regression
progression = small around big homes, increases value regression = large home around small, decreases value
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3 approaches to appraisals
- sale comparison (pay no more than others similar)
- cost approach (pay no more than cost to build)
- income approach (projected flow of $)
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Reconciliation
weight comps to calculate price of property
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reproduction vs replacement cost
reproduction = build exact replica (ex: exact detail, historic features brought back to life) replacement = build similar but with modern materials but serves same functionality
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curable vs incurable
curable = get money back incurable = unable to get money back
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Depreciation attributed to (3)
- physical deterioration
- functional obsolescence (poor design)
- external obsolescence (i-95 noise, off property problems)
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effective age vs economic life
effective age = might be 5 years old but took good care of it so only 2 years old
economic life = years structure expected to be useful
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PGI vs EGI vs NOI
PGI = Potential Gross Income = total annual income if fully rented and no collection losses EGI = Effective Gross Income = deduct vacancy and collection losses (commonly use 10%) NOI = Net Operating Income = subtract all expenses
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NOI Operating Expenses Categories (3)
- Fixed expenses = do not fluctuate (ex: property taxes and hazard insurance)
- Variable expenses = fluctuate (utilities, supplies, etc)
- Reserve for replacements
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Examples that are NOT NOI
Do not contribute to actual operation:
mortgage expenses
depreciation
income taxes
business-related expenses (payroll, advertising, etc)
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OAR
Overal Capitalization Rate = NOI / Value
aka: market cap rate
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How to calculate NOI
NOI = OAR x Value
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GRM
Gross Rent Multiplier = sale price / gross monthly rent
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Estimate Market Value
Estimated Market Value = rental income x market GRM
