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Section 1

Learning Objectives. Identify the appraisal process Define an appraisal Describe the process within the competency rule Recognize the difference between an appraisal, an appraisal review, and an appraisal consulting assignment . Learning Objectives. Understand the similarity of the appraisal process in all assignments Differentiate between development and reporting Recognize the steps in the appraisal process Comprehend the various processes within the appraisal process Understand the pro197

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Section 1

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    1. Section 1 Appraisal Procedures

    3. Learning Objectives Understand the similarity of the appraisal process in all assignments Differentiate between development and reporting Recognize the steps in the appraisal process Comprehend the various processes within the appraisal process Understand the process of scope of work

    4. Learning Objectives Understand the process of managing an assignment Understand the process of market analysis Understand the process of highest and best use Identify the approaches to value Understand the process of reconciliation

    5. The Appraisal Process Different Definitions of Appraisal Series of Processes within The Appraisal Process Standard of Practice Competency Competency Rule Competency Decision Questions after the Engagement Process

    6. The Appraisal Process

    7. The Appraisal Process Problem Identification Competency Rule Assignment Elements Scope of Work Determine Confirm Perform Disclose

    8. The Appraisal Process Manage the Assignment Plan Organize Staff Direct Control

    9. The Appraisal Process Data Collection, Verification, and Market Analysis Specific Data Primary Data General Data Secondary Data Market Analysis

    10. The Appraisal Process Highest and Best Use Physically possible Legally permissible Financially feasible Maximally productive Land Value

    11. The Appraisal Process The Approaches to Value Income Approach Cost Approach Sales Comparison Approach Reconciliation Communication of the Results

    12. Scope Of Work The Process of Scope of Work Determine the Scope—Preliminary Determination Confirm the Scope—Confirmed Determination Perform the Scope Disclose the Scope Acceptability of Scope of Work/Due Diligence Reasonable expectations of the client Peer’s performance of assignment

    13. Market Analysis Definition Study Process Market Conditions Market Analysis and the Appraisal Process Data Analysis Two Basic Functions of Market Analysis Provide relevant data for completion of HBU Provide relevant data completing the three approaches to value Market Analysis and Highest and Best Use

    14. The Market Analysis Process Step 1: Productivity Analysis Step 2: Define the Market and Users Step 3: Demand Analysis Step 4: Supply Analysis Step 5: Analyze Interaction between Supply and Demand Step 6: Forecast (Market Penetration)

    15. Types Of Analysis Economic Base Analysis Market Study Marketability Study Investment Analysis Feasibility Analysis

    16. Highest and Best Use As if Vacant As if Improved Identify comparables Property management Maintain Renovate, convert, or modify Repair Demolish

    17. 4 Test of Highest and Best Use Physically Possible Legally Permissible Financially Feasible Maximally Productive

    18. The Process of Reconciliation Consider the Relevant Facts Determine How the Facts Match Up Reach Conclusions Disclose the Reasoning

    19. Section 2 Analytical Techniques

    20. Learning Objectives Understand the difference between population and sample Understand measures of central tendency Calculate the mean, median, and mode of an array of numbers Understand measures of variability Calculate range, variance, and standard deviation Calculate weighted averages

    21. Learning Objectives Understand the financial principal of time value of money Distinguish between simple interest and compound interest Understand each of the six functions of a dollar Use the various methods to compute the six functions of a dollar Calculate a mortgage payment

    22. Statistics Overview Statistics Population Parameter Sample Statistic

    23. Measures of Central Tendency Mean Median Mode Selecting a Measure of Central Tendency

    24. Mean, Median & Mode example Determine the mean, median, and mode of the following data set: {310, 245, 275, 112, 93, 245} Array: {93, 112, 245, 245, 275, 310} Mean: (93 + 112 + 245 + 245 + 275 + 310) ? 6 = 213.3 Median: (245 + 245) ? 2 = 245 Mode: 245

    25. Measures of Variability Range Difference between highest and lowest number of a data set Variance Variance = (sum of square of the deviations from the mean) ? (total observations – 1) Standard Deviation Square root of Variance

    26. Range, Variance, & Standard Deviation Example Array: {24, 26, 31} Range: 31 – 24 = 7 Mean: (24 + 26 + 31) ? 3 = 27 Variance: (24 – 27)2 = (-3)2 = 9 (26 – 27)2 = (-1)2 = 1 (31 – 27)2 = (4)2 = 16 9 + 1 + 16 = 26 26 ? 2 = 13 Standard Deviation: Square root of 13 ?13 = 3.61

    27. Weighted Average Multiply element by its weight Add up products Add up weights Divide total of products by total weight

    28. Mathematics of Finance Time Value of Money Simple Interest—no accrued interest Compound Interest—accrued interest Compounding Discounting

    29. Six Functions of a Dollar Compound Factors and Discount Factors Future Value of $1 Future Value of $1 per Period Sinking Fund Factor Present Value of $1 Present Value of $1 per Period Payment to Amortize $1

    30. Mathematics of Finance Calculating a Mortgage Payment Financial Calculators

    31. Section 3 An Overview of the Approaches to Value

    32. Learning Objectives Perform all necessary calculations within the three approaches to value Understand the relationship between the three approaches Understand land/site valuation techniques Understand the process of each approach to value Understand the strengths and limitations of each valuation approach Understand reconciliation within each approach

    33. Learning Objectives Understand how to reconcile between the approaches Define a unit of comparison Define an element of comparison Recognize the difference between quantitative and qualitative adjustments Understand the sequence of adjustments Distinguish between percentage adjustments and lump sum adjustments

    34. The Sales Comparison Approach Elements of Comparison Property Rights Conveyed Financing Conditions of Sale Marketing Conditions (Time) Location Physical Characteristics

    35. Methodized Process of the Sales Comparison Approach Research Relevant Sales Data Verification Choosing Relevant Units of Comparison Adjustments Reconciliation

    36. Sales Comparison Approach Making Adjustments Sales Grid Extracting Adjustments Net Adjustments

    37. The Cost Approach

    38. The Cost Approach Replacement Cost New/Reproduction Cost New (RCN) Methods of Cost Analysis Cost Index Method Square Foot Method Unit-In-Place Method Quantity Survey Method

    39. Accrued Depreciation Depreciated Cost of the Improvements Physical Depreciation Incurable Curable Obsolescence Functional External

    40. Methods of Depreciation Economic Age-Life Method Modified Economic Age-Life Method The Breakdown Method Straight-Line Depreciation Method Market Method of Depreciation

    41. Land or Site Valuation Techniques Sales Comparison Method Allocation Method Extraction Method or Abstraction Method Subdivision Development Method Ground Rent Capitalization Method Land Residual Method

    42. The Income Approach Net Operating Income (NOI) Potential Gross Income (PGI) – Vacancy & Collection Loss = Effective Gross Income (EGI) – Operation Expenses = Net Operating Income (NOI) Potential Gross Income Vacancy and Collection Loss Effective Gross Income Operating Expenses

    43. Direct Capitalization Relationships

    44. Income Multiplier Method

    45. Section 4 Land or Site Valuation Techniques

    46. Learning Objectives Identify the six land or site valuation techniques Value land or site using all six valuation techniques Understand the sequence of adjustments Distinguish between percentage adjustments and lump sum adjustments

    47. Sales Comparison Method Elements of Comparison Property Rights Conveyed Financing Payment in Cash or Cash Equivalency Unaffected by Special Financing or Sales Concessions

    48. Sales Comparison Method Elements of Comparison Conditions of Sale Comparable Sales: where buyer and seller are typically motivated, well-informed and acting in best interests Marketing Conditions (Time) Sale Dates of Comparables Value Affected by Other Recent Market Changes

    49. Sales Comparison Method Elements of Comparison Location Same Neighborhood Account for Differences in Location Physical Characteristics Size Shape Terrain

    50. Sales Comparison Method Elements of Comparison Zoning and Land-Use Restrictions Public Restrictions Private Restrictions Availability, Capacity, and Proximity of Utilities Undeveloped land Site

    51. Sales Comparison Method Adjustment Process Extract Adjustments with Paired Sales Analysis Apply Adjustments to Comparable Unit of Comparison = Sales Price ÷ Element of Comparison

    52. Sales Comparison Method Adjustment Process Order of Percentage Adjustments Property Rights Conveyed Financing Conditions of Sale Marketing Conditions (Time) Lump-Sum Dollar Adjustments

    53. Sales Comparison Method Reconciliation Weighting Process Value Range before and After Adjustments Sales Grid and Market Data Grid

    54. Allocation Method Based on the Principal of Balance Proportional Relationship between Land Value and Total Property Value Ratio of Land to Building Method Used Only to Support Land Values from Other Techniques

    55. Extraction or Abstraction Method Subtraction of Depreciated Improvement Costs from Comparable Formula: Replacement/Reproduction Cost New (RCN) – Accrued Depreciation Depreciated Cost of Improvements Indicated Value (Sales Price) – Depreciated Cost of Improvements Land (site) Value

    56. Extraction or Abstraction Method

    57. Subdivision Development Method Subtraction of the Costs of Development and Subdivision from Expected Sale Prices Valuing Land in Transition from One Use to Another Direct Sales of Similar Uses Not Available

    58. Subdivision Development Method Principle of Anticipation Fundamental to Method Absorption Rate Discounting: Present Value of a Future Benefit

    59. Ground Rent Capitalization Method Ground Lease Involved Capitalization of Income from Ground Lease

    60. Ground Rent Capitalization Method

    61. Land Residual Method Deduction of Building’s Net Income from Property’s Total Net Income Capitalization of Net Income

    62. Section 5 Property Description

    63. Learning Objectives Be familiar with basic real property concepts Understand real property characteristics Identify the significance of land in real estate Demonstrate familiarity with how various disciplines view the concept of land Define an estate Identify the characteristics of land

    64. Learning Objectives Understand the geological characteristics of land Identify the difference between land and site Understand what delineates a neighborhood Understand architectural styles Understand colloquialism Identify construction types, main components of construction, and the styles of construction

    65. Land/Site Geological and Geographical Characteristics Land Real Estate and Real Property Surface, Subsurface, Air, and Water Rights Surface and Subsurface (Mineral) Rights Air Rights (Within Limitations) Water Rights (Riparian and Littoral)

    66. Land Definition

    67. Land vs. Site Raw Land Site Vacant Land Land Analysis Land Description

    68. Physical Characteristics of Land/Site Size and Shape Excess Land Surplus Land Site Improvements Internal (On-site) External (Off-site)

    69. Geographical Considerations Topography Accessibility External Influence Locational Influence Plottage (Assemblage) Property Description and Location

    70. The Neighborhood Definition of Neighborhood Natural Boundaries Physical Boundaries (Roads, Rivers, Railroad Lines) Neighborhood Names Economic Boundaries Protected Classes

    71. Architectural Styles The Importance of Generic Labeling Generic (Single Story, One-and-a Half Story) Local Names (Cape Cod, Queen Anne Bungalow) Construction Styles

    72. Major Construction Components Foundation Framing Roofing Roofing Styles Roofing Material Doors Walls Windows Flooring, Wall Coverings, and Floor Coverings

    73. Concrete Slab Foundation

    74. Pier and Beam Foundations

    75. Frame Construction Types

    76. Frame Construction Types

    77. Section 6 Residential Application Case Studies

    78. Case Studies Case Study #1 Case Study #2 Case Study #3

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