Chapter 18 Real Estate Appraisal

1. Chapter 18Real Estate Appraisal Measurement is vital to the appraiser—not just physical measurement in feet and inches, but measurement of value and cost.

2. 18 Real Estate Appraisal • Learning objectives • Identify the different types and basic principles of value • Describe the three basic valuation approaches used by appraisers • Explain the steps in the appraisal process • Distinguish the four methods of determining reproduction or replacement cost

3. 18 Real Estate Appraisal • Regulation of appraisal activities • Competitive market analysis • In Georgia, real estate sales associates and brokers cannot perform an appraisal unless they also have an appraiser’s license or certification

4. 18 Real Estate Appraisal • Appraisal process • State the problem • List the data needed • Gather, record, verify, and analyze data • General data • Specific data • Data for each approach • Determine the highest and best use • Estimate the land value • Estimate value by each of the three approaches • Reconcile the estimated values • Report the final value estimate

5. 18 Real Estate Appraisal • Value determinants • Demand • Utility • Scarcity • Transferability • Value • Market value • Market value versus market price (the sales price) • Market value versus cost

6. 18 Real Estate Appraisal • Basic principles of value • Anticipation • Change • Competition • Conformity • Contribution • Highest and best use

7. 18 Real Estate Appraisal • Basic principles of value • Increasing and diminishing returns • Plottage • Regression and progression • Substitution • Supply and demand

8. 18 Real Estate Appraisal • Sales comparison approach to value • Subject property versus comparable properties • Property rights • Financing concessions • Market conditions • Conditions of sale • Market conditions since date of sale • Location • Physical features and amenities

9. 18 Real Estate Appraisal Cost approach to value • Estimate land value as if vacant and available for its HBU • Estimate cost of construction • Estimate accrued depreciation • Deduct accrued depreciation from construction cost as if new • Add the land value estimate

10. 18 Real Estate Appraisal • Cost approach to value • Reproduction cost versus replacement cost new • Square-foot method • Unit-in-place method • Quantity-survey method • Index method • Depreciation • Physical deterioration • Functional obsolescence • External obsolescence

11. 18 Real Estate Appraisal • Income approach to value • Annual potential gross income • Less vacancy loss equals • Effective gross income • Less Annual operating expenses equals • Net operating Income • Divided by the Capitalization rate equals • Market Value Estimate

12. 18 Real Estate Appraisal Reconciliation • Income approach to value • Gross rent multiplier (GRM) • Gross income multiplier (GIM)

13. 18 Real Estate Appraisal • Georgia appraiser classifications • State registered real property appraiser • Simplest set of requirements • State-licensed real property appraiser (SLRPA) • State-certified residential real property appraiser (SCRRPA) • State certified general real property appraiser (SCGRPA)