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3,000 hours of residential experience, no fewer than 30 months, 1500 non residential appraisal hours
Fee Simple Estate (legal Description #2)
Most common type of ownership, right to use land now and for an indefinite period
Life Estate (legal Description #3)
a present, possessory interest that lasts only as long as you are alive, and then ownership is returned to the person who sold it to you.
real property interest that conveys a limited right of use or enjoyment, such as the right to travel over a parcel of land.
a temporary permission to come onto the land of another for a specific purpose. it is non exclusive to one person, meaning once they are enacted the public has open access.
when part of an improvement or addition on a piece of land reaches beyond the property lines/boundaries onto an adjoining parcel.
the absolute ownership of a unit in a multiunit building based on a legal description of the airspace the unit actually occupies, along with a specified share of the undivided interest in the common areas within the development.
Planned Unit Development - type of development, as we;; as a zoning classification, that features individually owned parcels together with shared common areas.
Personal Property vs. Real Estate
Personal property can be any movable object that is yours. Real Estate is immobile.
Public Restrictions (list)
Taxation, Eminent Domain, Escheat, Police Power to establish zoning laws, etc.
Elements of a Legal Contract
an agreement between the buyer and seller, must be of legal age and mental capacity
a written instrument by which the owner of real estate intentionally conveys to a purchaser interest in a parcel of real estate (must have a granting clause)
Market Value (definition)
Book - value in exchange. USPAP - a type of value, stated as an opinion, that presumes the transfer of a property as of a certain under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal.
creates a lien in favor of the mortgagee (lender) on the property of the mortgagor (property owner). The lien is enforced if the owner fails to meet payments, and the enforcing is usually stated prior in the contract.
Value Principles (list)
Anticipation, balance, change, competition, conformity progression & regression, contribution, externalities, factors of production, life cycle property, highest & best use, law of increasing returns, law of decreasing returns, opportunity cost, substitution, supply & demand, surplus productivity
the way to determine the value of real property, the price someone is willing to pay is determined by a similar property and its respective price.
Sales Comparison Approach
aka market data approach, the appraiser finds 3-5 (or more) properties that have recently sold and are similar to the subject property.
Sales Comparison Formula
Sales Price of Comparable Property +/- adjustments = Indicated value of subject property
The appraiser estimates any improvements to the land (such as structures) on terms of their reproduction or replacement cost as though new.
Cost Approach Formula
Reproduction/Replacement Costs - Depreciation on Improvements + Site Value = Property Value
based on net income, or investment return, that a buyer expects from the property. The price the buyer will pay is determined by the probable return the property will yield from the investment.
Gross Living Area - the amount of finished, year-round habitable above-grade space, measured along the building's outside perimeter. DOESNT COUNT - attics, basements, crawlspaces. DOES COUNT - typically everything else.
Should have steel beams in the frame of the home. Look underneath. Won't have a foundation so dont look there.
subject property, contract and listing info, neighborhood data & demographics, urban vs. suburban vs. rural, site data,
Arm's Length Transactions
neither the buyer nor the seller is are acting under duress (greater duress, that is, than what is felt by the buyer and seller in the average transaction), the property is offered on the open market for a reasonable time, and both buyer and seller have reasonable knowledge of the property, its assets, and its defects.
Data Sources (book list)
Appraisers own records, official records of deeds, real estate assessor's office, records of sales, newspapers, internet valuation services.
Highest & Best Use
one must consider an entire range of uses for the land and determine which is most economically feasible, usually it will be valued with and without structures on the land.
3 Types of Depreciation
Physical Deterioration (wear and tear, curable and incurable, usually obvious), Functional Obsolescence (currently undesirable, dated features, curable or in curable) External Obsolescence (caused by external factors that bring value down)
Age Life Method (Calculating total physical deterioration)
Effective Age / Total Economic Life = Total Deterioration
Remaining Economic Life
the DIFFERENCE between the effective age of the subject and its estimated economic lifespan.
Most common way to calculate the cost of improvements is called the __________-___________ method.
Strengths of Cost Approach
It can be used when no others are available, provides an upper limit for property value, useful for finding the value of newly built homes and buildings, useful for special purpose buildings.
Weaknesses of Cost Appoach
It assumes Value=Cost, builders cost may vary drastically , its not accurate for old buildings.
a property that has sold and is similar to the subject, up to 12 months old but preferably less than 6, must have actually transferred ownership, avoid older sales because the market fluctuates so much, same neighborhood if possible, location is so important because it is immobile. Usually 3-6 comparables are used if possible.
Room Count (definition)
rooms, bedrooms, and bathrooms. Ex: 6-6-1.1 = 6 rooms, 3 Bedrooms, and 1 and 1/2 bathrooms
The method used to determine the amount of any single adjustment. Accomplished by comparing similar properties to isolate the value of a particular feature. **If the comparable is inferior, the adjustment is positive. vice versa.
the idea that the subject must fall in range of comparables, must fall within adjusted percentage as well, final value should be with a comparable price range.
Quality & Condition
Properties are typically adjusted for overall quality and condition using a rating system of 1-6 with 1 being new and 6 being old and unihabitable
Advantages of Sales Comparison Approach
Reflects the activity of the marketplace, relatively simple to understand and use, considered reliable and objective, preferred whenever we have comparable sales.
Disadvantages of Sales Comparison Approach
doesn't work unless there are comparables, making accurate and credible adjustments can be difficult
3 Types of Rent
Contract Rent - tenant pays a landlord, amount stated in lease.
Market Rent - potential rent on a property based on others in the area. Appraisers typically use this because they are looking for a typical market value.
Historical Rent - Shows trends and rent rates over a long period of time. Also shows vacancy rates, rent increases, etc.
Gross Rent Multiplier - to determine what a value of a single family property we use GRM.
**Sales Price / Yearly Rent = GRM
-compare rent of other homes that sold and their sales prices. ( Sales Price = GRM x Rent)
Money lost when the property is not being rented. Collection losses is any money that is not collected for some reason. V & C losses are usually expressed as a percentage.
Operating Expenses (3 types)
Variable expenses - can change dependant on a variable.
Fixed expenses - flat rates that will not change.
Reserves For Replacement - basically paying insurance for things.
The process of the weighing the different approaches in order to make one estimate of the value for the subject.
4 Factors of Reconciliation.
1. defn of value sought (usually market value)
2. amount and reliability of data
3. inherent strengths and weaknesses of each approach
4. relevance of each approach to subject