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Forces that affect value (PEPS)
Physical characteristics- size, shape, location, soil conditions and exposure
economic - interest rates
political- government regulations
Social- neighborhood interest affects values
Are the growth, stability and decline of the neighborhood based on social conformity.
Economic Principals of Valuation
Highest and best use
Supply and demand
Do not spend money on a property unless it contributes to its value or the income you will get from the property
Increasing and Diminishing Returns
Determines of something is a wise improvement to a property or not.
Principle of progression and regression
If there are both high and low priced homes in an area people normally don't want to buy the highest priced homes.
Competitive Market Analysis (CMA)
Market data approach and sales comparison approach
Most effective way for single family dwellings
Comparing recent sales to verify data and make adjustments to come up with a value for a property we are appraising
Important when making adjustments
Date of sale- recent sale
Location- roughly same location
Physical Features- adjust comps up down to meet subject property.
Terms and Conditions of Sale
Property you are comparing must have been sold under about the same conditions you plan to sell the subject property
Has nothing to do with original cost
Is based on the principle of substitution which states the maximum value of a property tends to be set by the cost of acquiring an equally valuable substitute property.
Cost to Replace- Accrued Depreciation+ land=
Cost to get a building that had the same utility; however it need not be an exact duplicate
3 types of depreciation
Locational Environmental/ economic obsolescence
Assumes the net income derived from the property will control the value. Not concerned with gross income.
Gross Rent Multiplier
Estimate value of rental properties
=sale price/ gross income
Very seldom used
Steps of Appraisal process
State the Problem (why do they want the appraisal)
List data required
Gather record and verify data
Analyze and interpret data
Apply up to three approaches to value
Reconcile or Correlate data or Estimate value
Uniform Residential appraisal report- required for govt backed loans
Lengthy written Narrative Report- most comprehensive
Paid flat fee
Must be licensed in SC
Can not pay referral fees
Can not charge a fee based on a % of appraised value