1. The 8 Steps in the Appraisal Process

1.  Define the Problem

2.  Determine the Scope of Work

3.  Data Collection and Property Desc.

4.  Data Analysis

5.  Site Value Opinion

6.  Application of the Approaches to Value

7.  Reconciliation of Value Indications & Final Opinion of Value

8.  Report of Defined Value

1. The Cost Approach
2. Sales Comparison Approach
3. Income Capitalization Approach

A land value opinion is usually dervied using the sales comparison approach using the sales of similar vacant parcels.  If insufficient data is unavailable the appraiser may use extraction, allocation, the land residual technique, ground rent capitlization or subdivision development analysis

The value of the property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation in the structures from all causes.

Useful in valuing new or nearly new improvements or properties that are not frequently exchanged in the market. 

1. Economic/External Obsolence
2. Functional Obsolence
3. Physical Deterioration 

Is the loss in value resulting from influences external to the property itself. External conditions causing EO may be international, national, industry-based, or local in origin.

 is the normal wear and tear that a building experiences as it ages and it depends on the original quality of construction and the level of ongoing maintenance. The two categories of deterioration, curable and incurable, have more to do with economics than the actual physical possibility of correcting something:

• Curable deterioration: Refers to a form of deterioration that’s economically feasible to repair. In other words, the increase in value exceeds the cost of repair. Painting is a good example of something that generally adds more value than it costs.

• Incurable deterioration: If the cost of repairing an item surpasses the value it adds to the structure, the item is considered incurable even if you can fix it. Usually these forms of deterioration are physical items associated with the structure of a building — significant foundation repairs probably would be classified as incurable. They’re incurable because you wouldn’t benefit economically by fixing them

Straight-line method for estimating depreciation

 the depreciation of real property in equal amounts over the allowed life of the property for tax purposes.

Examples: A commercial property can be depreciated using a tax life of 39 years. If the property's cost is $895,000, then dividing that amount by 39 would yield a straight-line equal amount of $22,949 in depreciation each year for 39 years.

This approach compares a subject property's characteristics with those of comparable properties which have recently sold in similar transactions.

valuation method appraisers and real estate investors use to estimate the value of income producing real estate. It is based upon the premise of anticipation i.e., the expectation of future benefits.

surveyor's description of a parcel of real property, using carefully measured distances, angles, and directions.  The boundaries are described by reference to monuments, courses & distances.

 Lot and Block System

or 

Recorded Plat

The lot and block survey system is a method used in the United States and Canada to locate and identify land, particularly for lots in densely populated metropolitan areas, suburban areas and exurbs. It is sometimes referred to as the recorded plat survey system or the recorded map survey system.

Recorded subdivision plat

provides for a unit of land approximately 24 miles square, bounded by base lines running east and west, and meridians running north and south. This 24 mile square is divided into areas six miles square called townships. Townships are further divided into 36 sections, each one mile square.

 Township

The intersection of a range & a township tier in the rectangular survey system.  Is nominally six by six miles square, or 23,040 acres.

Sections

1 square mile of land, contains 640 acres.  36 sections in a township.

The main north-south line in a particular grid, used as the starting point in numbering the ranges & township tiers

a strip of land 6 miles wide running north & south.

The original east-west line

east-west lines

Types of Physical Deterioration

Curable-- because the primary cause of such depreciation is the failure of the owner to maintain the property on an ongoing basis.

Incurable-- if the cost to cure or correct the physical defect is greater than the value that will be added to the property as a result.

Adjustments are made to the comparable properties to show if they are superior or inferior to subject.  The adjustments are calculated on the comparable properties, not the subject.  

**If a comp sold for $180,000, then you will add or subtract adjustments to account for positive or negative features.  After the adjustments are made, we have a new price that shows what the subject is worth based on the comparable sale or listing.