Term
| 4 characteristics of value are |
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Definition
D - Demand, desire for and ability to pay for
U - utility, serve a puroose
S - Scarcity, short supply relative to demand
T - Transferability, marketabel title |
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Term
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Definition
Act or process leading to an estimate of the value of identified legal rights in a secific parcel of real estate made by an individual having requisite knowledge, training and experience.
VALUE ESTIMATE IS OF THE LEGAL RIGHTS, NOT THE PHYSICAL REAL ESTATE |
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Term
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Definition
Cost - total amount expended to create
Price - amount actually paid in a R.E. transaction.
Value - monetary worth. Market Value is price that should be paid for a property |
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Term
Type of Value:
Market Value |
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Definition
= most probable price at which specified property rights should be sold.
1.property exposed to market for reasonalble time
2.buyer&seller are well informed and acting in self-interest
3 neither party acting under duress
4.seller has ability to convey marketable title
5.Payment is in U.S. cash or equivalent to cash |
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Term
Type of Value
Investment value |
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Definition
value of particular property to a particular investor
Highest price an investor will pay and lowest price a seller will accept |
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Term
type of value
salvage value |
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Definition
| amount that can be received from the sale of the parts from a demolished structure |
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Term
type of value
liquidation value |
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Definition
| amount remaining after all assets of business are sold in a hurried but not forced sale and all liabilities have been paid |
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Term
types of value
assessed value |
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Definition
| is the value assigned by the property appraiser for ad volrem tax purposes...including value for insurable value, going concern value, and the value of partial or fractional interest in property |
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Term
| principal of substitution |
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Definition
| recognizes that no one would pay more for a property than the amount nexxary to acquire an acceptable substitute |
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Term
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Definition
principal of:
substitution
change
competition
conformity
regression
progression
anticipation
contribution |
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Term
| Purpose and funtion of an appraisal |
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Definition
purpose is to estimate some type of defined value
funtion is the way the client will use the the appraisal (sell or not, buy or not, make loan or not, etc...) |
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Term
| 7 steps to the appraisal process |
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Definition
1.define the problem-
2.plan the assignment. general and specific
3.highest & best use
4.site value estimate
5.application of 3 approaches to value
6.reconciliation & final value estimate
7.report of the final value estimate |
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Term
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Definition
*rights to be valued
*type of definition of value(purpose)
*legal description of property
*effective date of the value estimate
*clients use of the appraisal (function)
*limiting conditions and asumptions, like envrnmntl issues that exceed the expertse of the appraiser
*scope of assignment; if unusual conditions exist, is the appraiser to consider them |
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Term
| highest and best use analysis |
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Definition
| value is analyzed as if site was vacant and improved. this helps determine is present use is the best or if a better use exists |
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Term
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Definition
sales comparison
cost depreciation
income capitalization |
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Term
| reconcilation and final value estimate |
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Definition
| the 3 approaches are weighed...the appraiser uses his confidence in the strength of the data and his expertise to determine best value of the subject property |
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Term
| comparable sales approach |
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Definition
1.locate 3-5 comp properties that are similar in design, size, location, age and condition...sold within 6-12mo
2.adjust the comparable sales price...adjust to subject property
3.reconcile the adjusted sales price...weigh adjusted sales price of ea comp property |
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Term
| adusting the comparable sales prices |
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Definition
adjustments for comp properties can be made for:
financing terms
conditions of sale
market conditions
location
physical characteristics |
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Term
| cost-depreciation approach (6 steps) |
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Definition
1.estimate value of the site as if vacant
2.estimate cost to replace or reproduce using one of these:
a)quantity survey method- detailed inventory and cost of each item required to construct
b)unit in pace method- cost of each component using national average per sq ft
c)unit-of-comparison : cost per sq or cubic ft of an entire building (benchmark building)
3. estimate accrued depreciation
a)physical deterioration
b)functional obsolescence
c)external obsolescence
4.subtract accrued depreciation from reproduction cost to derive the DEPRECIATED COST
5.estimate cost to construct any site improvements and subtract any depriciation in these items
6.add the vacant site value, the depriciated cost of the main improvement and the depreciated site improvements together. |
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Term
| Replacement cost vs reproduction cost |
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Definition
based on principle of substitution:
1.replacement cost- estimate cost at current to construct a comparable
2.reproduction cost-estimated cost to construct an exact duplicate at current prices |
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Term
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Definition
number of years buiding will contribute to the value of the land
effective age/total economic life= %rate of depreciation |
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Term
| income capitalization approach |
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Definition
+ PGI-potential gross income
- VCLs-vacancy&collection loss
+ OI-other income (coin machine etc)
= EGI-effective gross income
- FE- fixed expenses
- VE- variable expenses
- R- reseerves for replacements
= NOI-net operating income
then divide NOI by OAR-overall cap rate |
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Term
| How to get the capitalization rate from comp sales |
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Definition
IRV formula
income / rate X value |
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Term
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Definition
GRM=gross rent multiplier= sales price / gross rent
GIM=gross income multiplier= sales price / gross income |
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Term
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Definition
| regulates real estate appraiser performing appraisals in federally related transactions |
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Term
| Florida Real Estate Appraisal Board |
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Definition
Part II of F.S. 475 created FREAB
7 members appointed by gov & cnfrmd by senate
2 state-cert general appraisers w 5yr exp
2 state-cert residential appr. w 5yr exp
1 associated w firm that uses appraisals (ex. mortge lender
2 not associated w any appraisal or brokerage firm
all members seerve 4yrs, may not serve more than 2 consecutive terms. |
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Term
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Definition
Appraisers
Must register where they do business
Must complete 30hours continuing education
Must renew every 2years
subject to reprimands, suspend, fine, revoke or placed on probation |
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Term
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Definition
Registered Trainee Appraiser
Licensed Appraiser
Certified Residential Appraiser
Cert General Appraiser |
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Term
| Registered Trainee Appraiser |
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Definition
100hrs of class
which includes 15hrs USPAP
be directly supervised by LIC or CERT Appraiser
may work on any appraisal supervisor is qualified to appraise. Supervisor must sign |
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Term
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Definition
limited to appraising 1-4 family residence w a transaction value of $1mil or less if appraisal is non-complex
and limited to $250k is complex
*since 2003 this license is not being given... |
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Term
| Certified Residential Appraiser |
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Definition
200 class hrs
Associates degree or 21 semester hours of specific classes
document 2,500hrs of appraisal exp in less than 24mo
pass state exam
limited to 1-4 family residences no $restrictions |
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Term
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Definition
300 class hrs
bachelors degree or 30 semester of courses
document 3000 hours in less than 30mo
pass exam
at least 50% exp must have been non-residential work
can appraise any type of property |
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