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Terms in this set (47)
is supported estimate or opinion of value
Elements of Value (STUD)
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.
Present worth of future benefits
What we hope to get.
Exact dollar the property sells for
Perceived value based on use
Economic Principals of Valuation
Highest and best use
Supply and demand
Highest and best use
Most profitable single use for a property
supply and demand
Supply short, demand heavy prices go up.
Supply high, demand low, prices go down.
Lower price property will sell first
Do not spend money on a property unless it contributes to its value or the income you will get from the property
Improvements that don't add value to the home
Increasing and Diminishing Returns
Determines of something is a wise improvement to a property or not.
Dividing a larger parcel into smaller parcels
To assemble a number of parts to give them a greater value
Reasonable degree of
Lower price homes will go up in value towards prices of higher price homes
Higher price homes will go down in value towards the price of the lower price homes
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.
Nothing remains the same
Anticipate that the property is going up in value
Excess profits tend to attract this
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
Cost to get an EXACT duplicate
Any condition that adversely affects the value of property
Land can not be this...
3 types of depreciation
Locational Environmental/ economic obsolescence
Normal maintenance and wear and tear of the property
Economically makes sense to repair
Economically makes no sense to repair
Can be curable or incurable deals with the uses with in the property
Locational, environmental , economic obsolescence
Are incurable - has to do with the location
Assumes the net income derived from the property will control the value. Not concerned with gross income.
Net Operating Income
= gross income-vacancy - expenses
Rate of return received on an investment
Are annual unless otherwise stated
Return on Investment
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
Appraisals are good for
No specific time period
Info obtained in an appraisal can
Change day to day as needs change.
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