Finance 353: Real Estate Valuation

1. Finance 353: Real Estate Valuation A Short Course in the Valuation of Residential and Commercial Real Estate Wayne Foss, MBA, MAI, CRE Foss Consulting Group Email: wfoss@fossconsult.com

2. Introduction • Student Introduction • Name • Academic Level • Real Estate Experience • What do you expect to get from this course? • Future Goals • Instructor Introduction

3. Course Syllabus • Objectives • To develop an analytical approach to identifying and solving real estate problems • Course Coverage • techniques of appraisal analysis • development of appraisal theories • recent regulatory changes • Prerequisites • Fin 351 or equivalent

4. Course Syllabus, con’t... • Required Textbook • The Appraisal of Real Estate • 12th Edition • The Appraisal Institute • Course Project • Appraisal of a Single Family Residence • Group Project (3 to 4 students to a group) • Property of your choice • length approximately 30 to 50 pages including exhibits • presentation of findings in class

5. Course Syllabus, con’t... • Examinations • Type • 50% Multiple Choice or True False • Closed Book, Closed Notes • 50% Short Answer or Problems • Open Book, Open Notes • No Partial Credit • Calculators are permitted, computers are not • Make-up examinations are not permitted • Unless there an extraordinary circumstance

6. Course Syllabus, con’t... • Final Grade Weighting Policy • Mid-term 30% • Final Exam 35% • Course Project 30% • Class Participation 5% • Total: 100%

7. Course Syllabus, con’t... The Final Course Grade will be based on the following Scale:

9. Class Schedule DATETOPICASSIGNMENT Aug. 25 Introduction - Sept. 1 Nature of Value, Foundations, Markets Ch 1-3 8 The valuation process, Appraisal Reports Ch 4, 26 15 Fee Simple and Partial Interest Ch 5 Data Collection/Neighborhoods Ch 7-8 22 Land/Building Description Ch 9-10 29 Midterm - Oct. 6 Special Assignment 11 Highest and Best Use Analysis, Land Valuation Ch 11-12 20 Highest and Best Use Analysis, Land Valuation Ch 11-12 27 Cost Approach & Depreciation Ch 13-16

10. Class Schedule DATETOPICASSIGNMENT Nov 3 Sales Comparison Approach Ch 17-19 10 Sales Comparison Approach Ch 17-19 17 Income Approach Ch 20-22 24 Fall Recess Dec. 1 Yield Capitalization and DCF Ch 23, 24 Reconciliation Ch 25 8 Case Presentations 15 Final Examination

11. Nature of Appraisals, Value andReal Estate Markets • Nature of Appraisals • Definitions • Purpose and Intended Use • Distinctions between real estate, real property and personal property • Nature of Value • Price versus Cost • Types of Value • Economic Principles • Real Estate Markets • Characteristics • Market Analysis

12. The valuation process and Appraisal Reports • The Valuation Process • A systematic procedure employed to provide the answer to a client’s questions about the value of real property • Appraisal Reports • Complete or Limited • Self-contained, Summary or Restricted

14. Fee Simple and Partial Interests,Data Collection and Neighborhoods • Fee Simple and Partial Interests • Types of Estates • Lease Interests • Easements • Data Collection and Analysis • General Data • Specific Data • Neighborhoods and Districts • A Neighborhood is - • A group of complementary land uses • A District is - • Characterized by homogeneous land uses

15. Land and Building Descriptions • Land Description • Types of Legal Descriptions • Site analysis • Sources of Data • Building Description • Architecture • Inspection • Improvement Analysis

16. Highest and Best Use Analysis, Land Valuation • Highest and Best Use Analysis • Land or Site as though vacant • Property as Improved • Systematic Approach to analysis • Legally Permissibility, Physically Possible, Financial Feasibility, Maximally Productive • Land Valuation • Approaches • Sales Comparison • Allocation and Abstraction • Income Capitalization • Units of Comparison

17. The Cost Approach • Building Cost Estimates • Reproduction Cost • Replacement Cost • Depreciation • Physical Deterioration • Functional Obsolescence • External Obsolescence • Curable or Incurable

18. The Sales Comparison Approach • The Sales Comparison Approach • Five Step Model • Research • Data verification • Units of comparison • Compare with sale property with the subject • Reconciliation • The identification and measurement of adjustments • Types of adjustments • Adjustment Process

19. The Income Approach • Ownership Interests • Market Value versus Investment Value • Five Step Model • Research • Data verification • Reconstructed Operating Statement • Selection of the Appropriate Capitalization method(s) and the Capitalization of Income • Reconciliation • Derivation of Rates

20. Yield Capitalization, Discounted Cash Flow and Reconciliation • Yield Capitalization, Discounted Cash Flow • Time Concept • Data Requirements • Applications • Reconciliation of Value Indications • A Review • Appropriateness of the Approaches • The Final Value Opinion • A Range or a Point Estimate?

21. Case Presentations and the Appraisal Report • Case Presentations • 3 to 4 students to a group • 15 to 20 minute presentation of findings • The Appraisal Report • Complete Self-Contained Format • 30 to 50 pages

22. So That’sAn Introduction to Real Estate Valuation Are there any Questions? Wayne Foss, MBA, MAI, CRE, Fullerton, CA USA Phone: (714) 871-3585 Fax: (714) 871-8123 Email: wfoss@fossconsult.com