Value and Financing Flashcards
tools, called valuation products, sales associates will need to use to navigate questions of value
Appraisal (most accurate)
Comparative market analysis (CMA)
Broker opinion of price (BPO) (least accurate)
Appraisals
is an official valuation of a property’s value
Characteristics
Is an impartial, qualified appraiser’s opinion of value
Applies to a specific property as of a specific date
Is supported by relevant market information
An appraisal is a very educated and data-driven approach to finding the market value of a property, but it’s an opinion nonetheless
Appraisers
s an individual who is trained and licensed to perform appraisals, or officially estimate the value of real property
Appraisers skills
job is to supply impartial and unbiased information in order to estimate the market value of a property
Strong analytical skills
The ability to observe and assess market trends
The ability to separate opinion from fact
Appraiser requirements
You must meet the education requirements for the type of appraisal license for which you’re applying.
You must gain the experience required for your desired license or certification.
You must pass the written exam.
In florida
Appraisers aren’t the only ones who can perform appraisals
A state-licensed and certified appraiser is the only one who can do an appraisal for federally-related transactions.
A real estate licensee may perform an appraisal and receive compensation for doing so in all other, non-federal transactions.
Cannot present themselves as state certified licensed appraisers
They regulate under the Uniform Standards of Professional Appraisal Practice. USPAP
Uniform Standards of Professional Appraisal Practice (USPAP)
is an agency charged with overseeing, regulating, and promulgating real estate appraisals and appraisal practices. It is the ethical code that appraisers in the United States must follow.
it is unethical for an appraiser to accept compensation based on the value of a property.
AQB
APPRAISER QUALIFICATIONS BOARD
Between USPAP, AQB, and FREAB
you can trust that your appraisal will be well-regulated and compliant.
what can be appraised
Single-family homes
Apartment buildings
Condominiums
Offices
Shopping centers
Farms
Commercial buildings
Situations involving appraisal
Any sale of real estate
Mortgage lending, especially for government-backed loans
Setting rental rates for leased property
Finding investment values
Government acquisitions of property, such as eminent domain
Acquiring property insurance
Tax assessment appeals
Appraisal report
The tangible result of an appraisal is an appraisal report. This document, created by a licensed appraiser, sums up a property’s market value based on collected data
the appraisal report is usually paid for by the buyer. The appraiser who will complete the appraisal report is usually chosen by the lender.
improtant of appraisal
the seller wants to know how much they can charge for their property,
the buyer wants to make sure they’re getting a fair deal,
the lender (if financing is involved) wants to be certain they aren’t offering a loan for more than the property is worth.
Comperative Market Analysis
CMA) is a report that compares the prices of recently sold or listed homes (“comparables”) in order to estimate the market value of a similar property (the “subject property”) located in the same area. This is the tool you’ll use to guide your client towards a proper price for their property.
CMA compliance
Because they are not appraisals, this also means they do not have to adhere to USPAP standards.
sales associate charges a fee for preparing a CMA, that fee must be paid to the employing broker and not directly to the sales associate (who actually conducted the CMA).
Appraisals vs CMA differences
You sometimes have to have an appraiser’s license to create an appraisal.
An appraisal is usually done for a fee.
A CMA is usually done for free.
A CMA is less detailed AND less reliable than an appraisal.
Appraisals vs CMA similarities
Both are used to arrive at a fair market value of a property.
Both use a sales comparison approach that is based on the principle of substitution and the principle of contribution.
appraisals must conform to USPAP standards but CMAs do not.
Creating CMA
Evaluate the neighborhood.
Evaluate the subject property.
Find comparables.
Compare and adjust selected comparables.
Establish a listing price range.
I like to think of it as working from the outside in
Brokers price opinion
his may also be referred to as a broker’s opinion of value (BOV)
is a broker’s opinion of the value of a piece of real property, given in writing. A broker price opinion is similar to a comparative market analysis. It’s created by a real estate license holder, not a licensed appraiser. Essentially, it’s an estimation of property value that may be even shorter or less formal than a CMA
Compliance
BPOs may NOT be represented as appraisals.
Sales associates may perform a BPO for compensation but may only do so under the supervision of their employing broker.
Compensation paid for a BPO must be given to the broker.
USPAP regulations do NOT apply to BPOs.
Financing
Third party Financing involves
Mortgage brokerage companies
Credit unions
Savings associations
Commercial banks
Mortgage Loan Origination
In its simplest terms, loan origination is the multi-step process through which a borrower obtains a mortgage loan from a lender.
A mortgage loan originator license is needed to operate as a mortgage loan originator. A real estate license alone does NOT qualify a person to originate mortgages.
