Real Estate Value
The present monetary worth of benefits arising from the ownership of real estate.
Primary Benefits that contribute to real estate value
income, appreciation, use and tax benefits
Appreciation
Increase in the market value of a parcel of land over time usually resulting from a general rise in the sale prices of real estate through the market area.
Balanced market
When supply and demand are equivalent
Supply and Demand
the availability of certain properties interacts with the strength of the demand for those properties to establish price. Affects property value.
Utility
Use in a certain marketplace. Not the same as function. Affects property value
Transferability
How readily or easily title or rights to real estate can be transferred. Affects property value.
Anticipation
The benefits a buyer expects to derive from a property over a holding period. Affects property value.
Substitution
a buyer will pay no more for a property than they would have to pay for an equally desirable and available substitute property. Affects property value.
Contribution
the degree to which a particular improvement affects market value of the overall property. It is what the market recognizes as the change in value, not what the item costs.
Diminishing marginal return
the cost to improve exceed contribution.
Highest and best use
a single use for a property that produces the greatest income and return. A property achieves its maximum value when it's put to this use.
Highest and best use
must be legally permissible, physically possible, financially feasible and maximally productive.
Conformity
a property's max value is attained when it's form and use are in tune with surrounding properties and uses.
Progression and regression
the value of a property influences and is influenced by the values of neighboring properties. Higher surrounding values causes your value to rise and vise versa.
Assemblage
the conjoining of adjacent properties, sometimes creates a combined value that is greater than the values of the individual properties.
Subdivision
The division of a single property into smaller properties resulting in a higher total value.
Determine the purpose
Step one in the appraisal. It influences the estimate of the value.
Market Value
Most used for single family appraisals. Estimates the price at which a property will sell at a particular time. Used in brokers estimates of value.
Reproduction value
value based on the cost of constructing a precise duplicate of the subject property's improvements, assuming current construction costs.
Replacement Value
value based on the cost of constructing a functional equivalent of the subject property's improvements assuming current construction costs.
Salvage Value
the nominal value of a property that has reached the end of it's economic life. Also an estimate of the price at which a structure will sell if it's dismantled and moved.
Plottage Value
an estimate of the value that the process of assemblage adds to the combined values of the assembled properties.
Assessed value
the value of a property as estimated by a taxing authority as the basis for taxation.
Condemned Value
the value set by a county or municipal authority for a property which may be taken by eminent domain.
Depreciated value
a value established by subtracting accumulated depreciation from the purchase price of a property.
Reversionated value
the estimated selling price of a property at some time in the future.
Appraised value
an appraiser's opinion of a property's value.
Rental value
an estimate of the rental rate a property can command for a specific period of time.
Leasehold value
an estimate of the market value of a lessee's interest in a property
Insured value
the face amount a casualty or hazard insurance policy will pay in case a property is rendered unusable.
Book value
the value as carried on the accounts of the owner. Equal to the acquisition price plus capital improvements minus accumulated depreciation.
Mortgage Value
the value of the property as collateral for a loan.
Market value
an opinion of the price that a willing seller and a willing buyer would probably agree on for a property at a given time. The highest a buyer would pay and the lowest a seller would accept.
Market price
what a property actually sells for.
Uniform Residential Appraisal Report
the most commonly used form for residential appraisals. Promoted by the Fed. ntl morgage assoc.(fannie Mae) and the Federal home loan mortgage corporation (Freddie Mac)
First step in the appraisal
Define the appraisal problem and purpose.
3 approaches used in appraisal
Sales comparison, cost approach, income capitalization.
Reconciliation
reconcile the value estimates produced by the three appraisal approaches to value into a final value estimate.
Appraisal
an opinion of value supported by data and performed by a professional, disinterested third party.
Sales Comparison Approach
Also market data approach. Used for almost all properties. Used as brokers opinion of value.
Sales Comparison Approach
Based on the principle of substitution (comps) and contribution (the specific characteristics that add value to the property).
Weighted comparables
appraiser must ID which comp values are more indicative of the subject and which are less. Experience and judgement.
Comparative Market Analysis (CMA)
used by a broker or salesperson in attempting to est a listing price. It's a scaled-down version of the appraisers sales comparison approach. It is NOT an appraisal.
Cost Approach
most often used for recently built properties where the actual costs of development and construction are known. Also used for special purpose buildings which can't be valued by other methods bc of lack of comps or income data. Estimates either reproductio
Reproduction cost
the cost of constructing, at current prices, a precise duplicate of the subjects improvements.
Replacement cost
the cost of constructing, at current prices and using current materials and methods a functional equivalent of the subject improvements. Primarily used for older structures.
Depreciation
the loss of value in an improvement over time. Does not apply to land!
Accrued Depreciation
the sum of depreciation from all causes: deterioration, obsolescence or changes in the neighborhood. (physical, deterioration, functional obsolescence and economic obsolescence.
economic life
the period during which the structure is expected to remain useful in its original use.
depreciation
the cost of the structure divided by it's economic life equals the annual amount of depreciation.
income capitalization approach
used for income properties. Based on anticpation (future income) and substitution (not paying more than other like properties)
Estimated POTENTIAL GROSS income
scheduled rent plus misc. income
Estimated EFFECTIVE GROSS income
potential gross income - vacancy and credit losses
Estimated Net Operating expenses
effective gross income - total operating expenses (fixed AND variable)
Capitalization Rate
an estimate of the rate of return an investor will demand on the the investment of capital in a property.
Value
Net operating income divided by the capitalization rate. I/R=
Gross Rent Multiplyer
from data using comps: price divided by MONTHLY RENT = ?
Gross Income Multiplyer
price divided by ANNUAL INCOME = ?
Financial Institutions Reform, Recovery and enforcement act (FIRREA)
Passed in 1989 in response to the savings and loan crises. Includes provisions to regulate appraisals. Fed. related appraisals must be performed by state certified appraisers.
Real Estate Value
The present monetary worth of benefits arising from the ownership of real estate.
Primary Benefits that contribute to real estate value
income, appreciation, use and tax benefits
Appreciation
Increase in the market value of a parcel of land over time usually resulting from a general rise in the sale prices of real estate through the market area.
Balanced market
When supply and demand are equivalent
Supply and Demand
the availability of certain properties interacts with the strength of the demand for those properties to establish price. Affects property value.
Utility
Use in a certain marketplace. Not the same as function. Affects property value
Transferability
How readily or easily title or rights to real estate can be transferred. Affects property value.
Anticipation
The benefits a buyer expects to derive from a property over a holding period. Affects property value.
Substitution
a buyer will pay no more for a property than they would have to pay for an equally desirable and available substitute property. Affects property value.
Contribution
the degree to which a particular improvement affects market value of the overall property. It is what the market recognizes as the change in value, not what the item costs.
Diminishing marginal return
the cost to improve exceed contribution.
Highest and best use
a single use for a property that produces the greatest income and return. A property achieves its maximum value when it's put to this use.
Highest and best use
must be legally permissible, physically possible, financially feasible and maximally productive.
Conformity
a property's max value is attained when it's form and use are in tune with surrounding properties and uses.
Progression and regression
the value of a property influences and is influenced by the values of neighboring properties. Higher surrounding values causes your value to rise and vise versa.
Assemblage
the conjoining of adjacent properties, sometimes creates a combined value that is greater than the values of the individual properties.
Subdivision
The division of a single property into smaller properties resulting in a higher total value.
Determine the purpose
Step one in the appraisal. It influences the estimate of the value.
Market Value
Most used for single family appraisals. Estimates the price at which a property will sell at a particular time. Used in brokers estimates of value.
Reproduction value
value based on the cost of constructing a precise duplicate of the subject property's improvements, assuming current construction costs.
Replacement Value
value based on the cost of constructing a functional equivalent of the subject property's improvements assuming current construction costs.
Salvage Value
the nominal value of a property that has reached the end of it's economic life. Also an estimate of the price at which a structure will sell if it's dismantled and moved.
Plottage Value
an estimate of the value that the process of assemblage adds to the combined values of the assembled properties.
Assessed value
the value of a property as estimated by a taxing authority as the basis for taxation.
Condemned Value
the value set by a county or municipal authority for a property which may be taken by eminent domain.
Depreciated value
a value established by subtracting accumulated depreciation from the purchase price of a property.
Reversionated value
the estimated selling price of a property at some time in the future.
Appraised value
an appraiser's opinion of a property's value.
Rental value
an estimate of the rental rate a property can command for a specific period of time.
Leasehold value
an estimate of the market value of a lessee's interest in a property
Insured value
the face amount a casualty or hazard insurance policy will pay in case a property is rendered unusable.
Book value
the value as carried on the accounts of the owner. Equal to the acquisition price plus capital improvements minus accumulated depreciation.
Mortgage Value
the value of the property as collateral for a loan.
Market value
an opinion of the price that a willing seller and a willing buyer would probably agree on for a property at a given time. The highest a buyer would pay and the lowest a seller would accept.
Market price
what a property actually sells for.
Uniform Residential Appraisal Report
the most commonly used form for residential appraisals. Promoted by the Fed. ntl morgage assoc.(fannie Mae) and the Federal home loan mortgage corporation (Freddie Mac)
First step in the appraisal
Define the appraisal problem and purpose.
3 approaches used in appraisal
Sales comparison, cost approach, income capitalization.
Reconciliation
reconcile the value estimates produced by the three appraisal approaches to value into a final value estimate.
Appraisal
an opinion of value supported by data and performed by a professional, disinterested third party.
Sales Comparison Approach
Also market data approach. Used for almost all properties. Used as brokers opinion of value.
Sales Comparison Approach
Based on the principle of substitution (comps) and contribution (the specific characteristics that add value to the property).
Weighted comparables
appraiser must ID which comp values are more indicative of the subject and which are less. Experience and judgement.
Comparative Market Analysis (CMA)
used by a broker or salesperson in attempting to est a listing price. It's a scaled-down version of the appraisers sales comparison approach. It is NOT an appraisal.
Cost Approach
most often used for recently built properties where the actual costs of development and construction are known. Also used for special purpose buildings which can't be valued by other methods bc of lack of comps or income data. Estimates either reproductio
Reproduction cost
the cost of constructing, at current prices, a precise duplicate of the subjects improvements.
Replacement cost
the cost of constructing, at current prices and using current materials and methods a functional equivalent of the subject improvements. Primarily used for older structures.
Depreciation
the loss of value in an improvement over time. Does not apply to land!
Accrued Depreciation
the sum of depreciation from all causes: deterioration, obsolescence or changes in the neighborhood. (physical, deterioration, functional obsolescence and economic obsolescence.
economic life
the period during which the structure is expected to remain useful in its original use.
depreciation
the cost of the structure divided by it's economic life equals the annual amount of depreciation.
income capitalization approach
used for income properties. Based on anticpation (future income) and substitution (not paying more than other like properties)
Estimated POTENTIAL GROSS income
scheduled rent plus misc. income
Estimated EFFECTIVE GROSS income
potential gross income - vacancy and credit losses
Estimated Net Operating expenses
effective gross income - total operating expenses (fixed AND variable)
Capitalization Rate
an estimate of the rate of return an investor will demand on the the investment of capital in a property.
Value
Net operating income divided by the capitalization rate. I/R=
Gross Rent Multiplyer
from data using comps: price divided by MONTHLY RENT = ?
Gross Income Multiplyer
price divided by ANNUAL INCOME = ?
Financial Institutions Reform, Recovery and enforcement act (FIRREA)
Passed in 1989 in response to the savings and loan crises. Includes provisions to regulate appraisals. Fed. related appraisals must be performed by state certified appraisers.