Week 6 - Improvement Analysis Flashcards
The process of improvement analysis encompasses three interlated tasks
Property inspection
Property description
Analysis of architecture style and functional utility
Goals of improvement analysis
Proper identification of the important building components for the valuation analysis
Sound judgement of condition and quality of improvements and components
Support for conclusions in highest and best use analysis and application of approach to the value
Define property inspection
Process of inspecting firsthand the typical improvements and building components of realestate involved in a valuation assignment, either the subject property of comparable property
Define property description
The analysis of a buildings designs, layout, construction details, size, condition and current use that provides the basis for comparing the subject property’s improvements and the improvements typically accepted in the subjects property market
Define improvement
A permanent addition to a property that enhances its capital value and that involves the expenditure of labour or money and is designed to make the property more useful or valuable
Reasons for improvement analysis
Accurate building description is essential in valuation
Help to identify extent and quality of building Improvements
Quality affects opinion of property value
Valuer needs good understanding of the improvements to identify and select suitable comparables
Elements of a building description - primary concerns
Type of use represented - eg house Codes and regulations affecting use Building size plan and construction Details of buildings exterior and interior equipment Have to work in a logical sequence Any faluts should be reported
Traditionally values divide land use into 5 groups
Residential commercial industrial agricultural and other
What is superstructure
The proportion of the building above the ground
Possible impacts on valuation process
Financial feasibility and productivity of sustainable construction and design elements could affect highest and best use analysis
Higher cost of sustainable materials can add to cost of construction indicated in cost approach
Cost estimates - lifespan of Eco friendly materials vs others
Income capitalisation - low maintenance on highly efficient green buildings will positively affect gross income and thereby value
As green buildings become more common lack of green in a certain building could affect its selection in comparable valuation
Define equipment and mechanical systems
Provide human comfort. Industrial buildings also contain process related equipment
E.g pulmbing, heating, cooling, ventilation, fire protection, alarms security
Define obsolescence
Loss in property value due to any cause
3 types of obsolescence
Physicals e.g. Peeling paint, worn carpet, wear and tear, leaky roof (general weathering)
Functional e.g. Awkward floor plan, inadequate sized rooms, outdated decorating (features that are not up to modern standards)
Economic - poor access to property, incompatible land use, poor quality neighbiurhood (loss of value due to influences outside the property)
Define functional utility
Ability of a property to be useful to perform the function for which it is intended according to current market trends and standards efficiency of a building in terms of architecture style, design and layout, traffic patterns and type of rooms
Define short life items
A building component with an expected remaining economic life that is shorter than the remaining economic life of the entire structure
