Valuation Process Flashcards
T/F There is one universal definition of market value used in real prop. Appraisal?
False
Steps in the Valuation Process
1.Define the problem
2.Determine scope of work
3.Gather, record, verify data
4.Determine highest and best use
5.Estimate land value
6.Estimate value by 3 approaches
7.Reconcile estimated values into final opinion
8.Report final opinion
Step 1 in Valuation Process
Define the problem
Step by step procedure that can be applied to any type of appraisel assignment
Valuation Process
An interest or interests in real estate is the definition of
Real Property
T/F Effective date of the valuation must be the date on which the appraiser inspected subject property
False. Can be past, present, or future date.
An appraisel report must specify date of_________ and date of __________
Appraisel and report. Two dates necessary
Who is responsible for identifying the intended use of an appraisel?
Appraiser
Final step in valuation Process?
Report final opinion of value
Identify, from sources reasonably reliable, characteristics of the prop. that are relevant to the type and def. of value & use of appraiseal including its location & physical legal and economic characteristics
Standards Rule 1-2 (e)
Most common usage for prospective value opinions?
Proposed improvement or development
Most common type of value sought by appraisers?
Market Value
Type of value stated as an opinion, that presumes transfer of prop., as of a certain date, under specific conditions, identified by appraiser as applicable.
Market Value
Identify type and definition of value, if to be market value, ascertain whether it is to be most probable price
(i) in terms of cash
(ii) financial arrangements equivalent to cash
(iii) in other precisely defined terms
(iv)if opinion is based on non market financing
Standards Rule 1-2 (c)
Purpose of an Assignement
To develop an opinion of the defined value of a specified interest in real estate
The use of an appraisers reported appraisal, as identified by appraiser based on communication with client
Intended Use
The client and any other part as identified as users of the appraisal
Intended User
Identify the client and other users
Standards Rule 1-2(a)
Identify the effective date of the appraisers opinions and conclusions
Standards Rule 1-2 (d)
An assignment specific assumption, as pf the effective date, which if found to be false, could alter the appraisers conclusions
Extraordinary Assumption
USPAP requires ______________ disclosure of hypothetical conditions
Clear and conspicuous
Appraisel term defined as: Condition directly related to specific assignnment, which is contrary to what is known by the appraiser to exist, but used for the purpose of analysis
Hypothetical Condition
Accomplishing the first 4 action steps provides basis for deciding which of property’s characteristics are relevant for the assignment
AO (advisory opinion) 22
Assignment conditions
Assumptions, extraordinary assumptions, hypothetical conditions. Laws and reg’s, and other conditions which affect scope of work
Step 2 in the Valuation Process
Scope of Work
The type and extent of research and anylses in an appraisel or appraisel review assignment
Scope of Work
Understanding which analysis, methods and techniques are necessary and what data to correctly complete the analyses
AO-22
Determine the scope of work necessary to produce credible results in accordance with this rule
Scope of Work Rule, Standards Rule 1-2(h)
1 Identify problem to be solved
2 determine and prefrontal scope of work necessary
3 disclose scope of work in report
Scope of Work Rule
Summarize scope of work used to develop the appraisel (includes disclosure of research and analysis preformed or not preformed)
Standard Rule 2-2 (a) (viii)
Data, info., and documentation necessary to supports appraiser’s opinions and conclusions and show compliance with USPAP
Workfile
Gather, record. And verify Data
Step 3 of Valuation Process
In valuation practice, the process of validating or establishing the truth about info. From another source
Verify
Appraiser must verify sale info. with __________,___________, or ____________
Buyer, seller, or one of their representatives or clearly state how the sale was verified and to what extent.
T/F According to Fannie Mae, use of sales data-particularly comp. sales data- provided by parties who have financial interest in the sale w/o appraisers verification of info. from disinterested source is acceptable.
False, acceptable to use, but only if verified by disinterested party
Determining highest and best use
- Legally permissible
2.physically possible - Financially feasible
- Maximally productive
Step 5 in Valuation Process
Estimate the land Value
Step 4 in Valuation
Determine Highest and Best Use
Step 6 in Valuation
Estimate Value by any applicable approach. Cost, Sales Comparison, or Income Capitalization
Step 7 in Valuation
Reconcile Estimated Value. Come to one reasoned opinion as to value, as of effective date.
Final Step in Valuation
Report Final Opinion of Value. Standard 2 USPAP.
Appraiser must be prepared to demonstrate that scope of work is sufficient to produce
Credible assignment results
An appraisal report must contain sufficient info. to allow __________ to understand the scope of work.
Intended user
According to USPAP, the credibility of assignment results is measured ___________
Effective date of value can be
Which is not an appraisers source for a legal description?
Postal address
Scope of Work applies to
Both appraisels and review assignments
An appraiser must comply with the SCOPE OF WORK RUKE when completing
An appraisel assignment only
