Week 3 Seminar (week 2 Content)

Question 1

Identify the main steps in the property valuation process.

Answer 1

1) Define the problem
2) Scope of work determination
3) Data collection & description
4) Market and marketability analysis
5) HBU analysis
6) Site valuation
7) Estimate value using more than 1 approach
7. 1) Sales comparison?
7. 2) Capitalisation?
7. 3) Cost approach?
8) Reconciliation
9) Establish value conclusion

Question 2

Discuss what specific data that a value would collect for the valuation of a shopping mall

Answer 2

Information about the actual property

• Physical inspection
• Information from the owners/ tenants
• Public records (e.g. local council)

Information about comparable sales

• Properties listed for sale / rent
• Property databases (e.g. RP data)
• Market participants (e.g. real estate agents, property managers)

Question 3

What would you recommend if the existing use of an improved property is not the highest and best use as vacant?

Answer 3

If Demolish ($) + vacant land ($) equals greater than current ($) then current is not highest n best use
E.g.
current = residential property @ $800,000
Demolish = $25,000
Total = $825,000
Vacant land as commercial property = $850,000
Therefore the HBU is to demolish the house and sell the land as a commercial lot

But if
demolish cost = $55,000
Total = $855,000
Which is more than the vacant land value as commercial property and therefore current use is the highest n best use

Question 4

When to use direct comparison approach?

Answer 4

• Sufficient data on recent market transactions

- Most suitable for single family residential property

Question 5

The value that property valuers generally estimate is market value, which is synonymous with

a) Value in use
b) Most probable selling price
c) Reproduction cost
d) Investment value

Answer 5

Answer: B)

Question 6

Which of the following is considered representative, thus, usable as a comparable sale for a market-value estimate?

a) A voluntary sale of a property before government acquisition
b) A forced sale
c) A sale to a family member
d) A house sold under normal market conditions

Answer 6

Answer: D)

Question 7

The first step of the valuation process, definition of the problem, includes which of the following?

a) Identifying the property and property rights being appraised
b) Specifying the date of valuation
c) Determining the purpose of the appraisal
d) All of the above

Answer 7

Answer: D)